Behold the Power of Low Expectations
By Rev Shark
RealMoney.com Contributor
4/21/2008 8:36 AM EDT
To be prepared against surprise is to be trained. To be prepared for surprise is to be educated.
-- James Carse
The big move in the indices last week was the function of two separate but related things. First, expectations for earnings reports were very low, particularly in the case of Google (GOOG) . Most of the earnings reports that have had positive reaction weren't all that fantastic, but expectations were so low that the stocks move up sharply anyway.
The second thing that helped fuel the rise in the indices was that many market players were unprepared for strength and had to scramble to cover shorts or add long exposure. There continues to be no shortage of economic worries out there that are likely to plague us for a while to come.
So the big question for us to consider this morning is whether the low expectations and lack of preparation for a rally are going to fuel a further rise in this market. It is quite easy to find macroeconomic arguments for why this market should struggle, but we have clear technical improvement in the charts of the major indices and the winds of upside momentum at our back.
The bulls definitely deserve the benefit of the doubt at this point, but one of the problems facing this market is that a few key sectors -- most notably oil, solar energy, agriculture, steel and metals -- have been the primary upside drivers lately and have become quite extended. Google helped technology stocks on Friday and many are now hopeful that the strength will broaden out to Internet and technology stocks in general. That would be very healthy for the overall market, but one huge day from Google because of bad analysis is not sufficient evidence to conclude that it's up, up and away for technology.
The key for the market right now is the aggressiveness of underinvested longs on pullbacks. If there is some real anxiety over not having enough long exposure, that is going to give us some very good underlying support.
The big danger for this market is news flow. Expectations are no longer quite as low now, as we are hit with a flood of new earnings this week from companies such as Apple (AAPL) . In addition, the parabolic move in oil and the struggling economy can easily infect market sentiment once again should the market not have surprising news like Google to focus on.
My game plan is to give the bulls the benefit of the doubt and be a bit more aggressive with buying. However, I am not going to chase extended charts and I will continue to be selective. Although the market needs some consolidation at this point, the mood shift is going to give us some support, and it is likely to take some pretty dramatic bad news to offset the benefit of the low expectations that we are enjoying.
We have a very minor pullback to start the day as the market shrugs off a poor report from Bank of America (BAC) , which once again shows the power of low expectations.
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Ülespoole avanevad:
In reaction to strong earnings/guidance: HAS +4.6%, ACI +4.5%, NVS +3.9%, DGX +3.0%, MRK +1.3%, LEE +1.0%... M&A news: PKTR +13.8% (to be acquired by BCSI for $7.10 a share)... Select coal names ticking higher on light volume following ACI's earnings report: ICO +3.4%, MEE +2.9%, BTU +2.7%... Other news: TIBX +5.3% (announces $300 mln stock buyback program), JASO +3.7% (signs long-term wafer supply agreement with GCL Silicon Technology), ICO +3.4% (still checking), SNP +3.3% (China Petroleum and PetroChina jump on government subsidy - Reuters), STO +3.0% (gains 1/7% in Norwegian trading, the most in 4 months as crude oil rose over $117 a barrel in New York after OPEC said it would maintain production), QGEN +2.4% (still checking), PTR +2.3% (China Petroleum and PetroChina jump on government subsidy - Reuters), TS +2.0% (still checking), GSK +1.1% (up in sympathy with MRK), IRBT +1.0% (announces funding agreement with US Army valued at $6 mln)... Analyst upgrades: HCSG +3.3% (upgraded to Outperform at Morgan Keegan), PPC +2.4% (upgraded to Outperform at Credit Suisse), SLB +1.1% (upgraded to Overweight at Morgan Stanley), POZN +1.1% (upgraded to Neutral at Broadpoint).
Allapoole avanevad:
In reaction to weak earnings/guidance: OPWV -12.8% (also names Bruce Coleman as Interim CEO), CNB -8.3%, AMLN -7.7%, MAT -3.6%, LLY -3.4%, ETN -3.4%, JEF -3.2% (also sells 13.7% strategic equity interest to Leucadia National), BAC -1.5% (also Moody's lowers BofA Corp's ratings; affirms bank's Aaa; to sell part of China bank stake - Financial Times), SAY -1.1%... M&A news: BCSI -3.4% (to acquire PKTR for $7.10 a share), GW -2.4% (Basic Energy Services and Grey Wolf agree to combine in ''Merger of Equals'' transaction)... Select European financial names showing weakness: RBS -4.6% (to announce rights issue and over $10 bln losses on investments - Reuters), ING -3.7%, HBC -1.0%... Other news: NCC -10.3% (close to $6 bln cash infusion), TMA -9.2% (announces Thornburg Mortgage Capital Resources did not make payment on the final maturity date of $300 mln), ADS -4.2% (terminates merger agreement with Blackstone Affiliates), SHLD -3.6% (Bank of America declines to renew credit pact)... Analyst downgrades: CRUS -5.4% (downgraded to Hold at Jefferies), GME -4.3% (downgraded to Sell at tier 1 firm), BCS -2.3% (downgraded to Neutral at Merrill), WFC -2.0% (downgraded to Underperform at Oppenheimer), R -2.0% (downgraded to Hold from Buy at Stifel), CAT -1.5% (downgraded to Neutral at Credit Suisse and downgraded to Market Perform at Wachovia).
Uuendasin täna hommikuste tulemustega just ära ka meie iga kvartaalse tulemuste tabeli, millele saab pilgu peale heita siit. Usun, et see aitab kaasa ülevaatlikuma pildi loomisele terviklikust tulemuste hooajast ning aktsiate reageeringutest neile.
Kui HAS on 8% plussis, on MAT juba sama palju miinuses ning JAKK sisuliselt nullis.
Kõik seni tulemused teatanud suuremad finantsettevõtted kurdavad, et kvartali viimased nädalad olid halvimad. Sama sõnum ka BACi konverentsikõnelt.
Henno, aga kas see UK valitsusepoolne meede pole mitte reedest? (vaata ka EURGBP). See oli tugev GBP sentimentimuutja (positiivsemaks). Kui enne oli tugevalt ootused et GBP nõrgeneb veel, siis reedel hakati GBP short kinni panema. EURGBP ja GBPJPY tugevad liikumised survestasid EURi ja seeläbi EURUSD-i (ja tooraineid).
OK, ma pole päris täpselt kindel aga mul on tunne, et praegune EURGBP liikumine on pigem tehniline või ülereageerimisele järgnenud korrektsioon.
OK, ma pole päris täpselt kindel aga mul on tunne, et praegune EURGBP liikumine on pigem tehniline või ülereageerimisele järgnenud korrektsioon.
Kui ma ajavööndiga ei eksi, siis 12:00 meie aja järgi.
momentum, võimalik et juba reedest, ma olin vahepeal arvutist eemal mõned päevad ja uudiseid eriti ei lugenud, kuid laiemalt pasundati sellest täna ja minu loetud uudisnuppudel oli tänane kuupäev
Henno, ma korra uuurisin asja. Tegelikult oli nii et Reedel teatati nagu põhimõttelisest valmisolekust turgu toetada ja täna tõesti tuli uudisele taha reaalne plaani sisu ja see tõesti polnud nii sexy kui oodati.