GUTS
Technical
Investors woke up yesterday as an oversold market collided with positive earnings and beige book news. Shorts were squeezed and the longs were paid. The S&P500 closed at 1195 up over 17 points, but still below its 200 day moving average. The nasdaq composite did even better closing at 2091 up over 35 points and closing above its 200 day line.
It is apparent that investors began to speculate earnings were going to be good and inflation would be in check. The smart money dipped its toes into the market starting last Thursday and continued to buy. The market is not out of the woods yet, however, it took a step in the right direction.
We continue to remain cautious although we began to add new positions. This is a tough market as many changes are underway. It will take guts to make some of the hard decisions necessary in order to profit from the future. Check our website at www.thesmartmoneyinvestor.com for the details.
Key Market Factors
As expected our Key Market Factors, being in flux, have driven the market. Part of the reason for the recent reversal is the more positive nature of our indicators. Oil has fallen in price. Interest rates, although providing a wall of worry, remain below 4.5% on the 10yr. And earnings are not looking so bad. Below is an evaluation of the status of the factors.
Oil NYMEX (positive -) - $59.55 - Recent hurricane activity in the Gulf drove up prices last week. Obviously, the hot money was quick in and quick out as the storm moves away from oil rigs and prices fell. Further, oil consumption was weaker than expected as inventories grew for the week and gasoline prices fell 6%+ the last few days. Falling demand and growing supplies are firming up the picture for the market as energy costs fall.
10 yr Treasury (positive) - 4.48% - Inflation was on the top of investors minds last week as CPI and PPI came in higher due to the recent hurricanes. However, underlying core inflation seems to be in check and the economy looks to be cooling. Our surveys confirm this reasoning. Resistance at 4.50% continues to stand up and consensus is growing that the Fed can continue to move rates higher at a measured pace without hurting the market.
3rd Quarter Earnings (positive) - 17% - positive earnings continue to come in without surprise. More importantly, 4th quarter projections remain in line for the most part. There are still a fair amount of reports left but as of today earnings are on the rise.
There are many opportunities for the smart money to participate. That said, there is a lot of dog doo out there, so watch your step. We continue to adjust and remain positive on the overall market.
Investors woke up yesterday as an oversold market collided with positive earnings and beige book news. Shorts were squeezed and the longs were paid. The S&P500 closed at 1195 up over 17 points, but still below its 200 day moving average. The nasdaq composite did even better closing at 2091 up over 35 points and closing above its 200 day line.
It is apparent that investors began to speculate earnings were going to be good and inflation would be in check. The smart money dipped its toes into the market starting last Thursday and continued to buy. The market is not out of the woods yet, however, it took a step in the right direction.
We continue to remain cautious although we began to add new positions. This is a tough market as many changes are underway. It will take guts to make some of the hard decisions necessary in order to profit from the future. Check our website at www.thesmartmoneyinvestor.com for the details.
Key Market Factors
As expected our Key Market Factors, being in flux, have driven the market. Part of the reason for the recent reversal is the more positive nature of our indicators. Oil has fallen in price. Interest rates, although providing a wall of worry, remain below 4.5% on the 10yr. And earnings are not looking so bad. Below is an evaluation of the status of the factors.
Oil NYMEX (positive -) - $59.55 - Recent hurricane activity in the Gulf drove up prices last week. Obviously, the hot money was quick in and quick out as the storm moves away from oil rigs and prices fell. Further, oil consumption was weaker than expected as inventories grew for the week and gasoline prices fell 6%+ the last few days. Falling demand and growing supplies are firming up the picture for the market as energy costs fall.
10 yr Treasury (positive) - 4.48% - Inflation was on the top of investors minds last week as CPI and PPI came in higher due to the recent hurricanes. However, underlying core inflation seems to be in check and the economy looks to be cooling. Our surveys confirm this reasoning. Resistance at 4.50% continues to stand up and consensus is growing that the Fed can continue to move rates higher at a measured pace without hurting the market.
3rd Quarter Earnings (positive) - 17% - positive earnings continue to come in without surprise. More importantly, 4th quarter projections remain in line for the most part. There are still a fair amount of reports left but as of today earnings are on the rise.
There are many opportunities for the smart money to participate. That said, there is a lot of dog doo out there, so watch your step. We continue to adjust and remain positive on the overall market.
- MESA - We have begun to add Mesa Air to our fund as the environment for airlines looks better. Falling fuel prices are also having a positive effect on the group. MESA operates flights for United Express, America West Express and Delta Connection. Rising prices and falling costs are a positive for the company in our estimation. Check the website for targets.
- ZHNE - Zhone will report earnings next week. We feel that costs related to its recent acquisition and reorganization are already built into shares. However, we do expect price volatility around the earnings report, which is typical for the company. ZHNE continues to lag its peers and can catch up as it goes into the better 4th and 1st quarters. The sale of its legacy systems may add a one time pop to earnings. The current stock price is at a level where insiders previously bought millions of shares.
posted by Burton Hess at 6:43 PM
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