Tuesday, April 07, 2009

Earnings Season Kicks Off Tonight

The market is lower again in early trading. Yesterday morning the market was also down, but I said a lot could happen by the end of the day. By the close of trading, the Dow had cut its losses to just -41 points. Let's see if today works out similar.

Earnings season kicks off tonight with the report from Alcoa (AA). Every single strategist out there thinks earnings are likely to be disappointing and guidance to be tepid. From a contrarian perspective, its possible that could set expectations low enough that even bad earnings reports from many companies won't push their stocks down further. We shall see.

Other than profit taking, there is not a ton of news this morning. Housing stocks are down the most, while healthcare and biotech are down the lease. Financials are also starting to bounce, with stocks like GS and MS bucking the weakness so far.

Asian markets were mostly lower overnight. The Bank of Japan left their interest rates unchanged at 0.1%, helping the Yen bounce modestly. The dollar is higher vs. the Euro. The 10-year yield is lower at 2.89%. And the VIX is slightly higher, still hovering near 41, just below its 200-day average.

Trading comment: Yesterday I took more profits on that short-term hedge I put on, and today I will start looking at adding some long exposure. I am looking at the financial etf (XLF) as well as the real estate etf (IYR), both of which remain beaten down, unloved, and could get another bounce.

I have not waded into individual stocks in a big way because I want to see how earnings reports come out. But stocks that dip after they report could offer good trading opportunities.


At 10:56 AM, Blogger Celal Birader said...

Hiya Jordan,

Looks like the institutional money is coming in the afternoons ( see HERE for example). As a professional, do you have a take on this ? What is institutional money trying to do ? Is it trying to spark some kind of rally ? Or just testing the waters ?

What do you think of UYG ?

At 3:37 PM, Blogger J. Kahn said...

I think that is prob. right about instit. money coming in. Most managers are underivnested, with too much cash at this point in the cycle. I'm still looking for SPX 875, and then reassess.

As for UYG, too volatile for my blood. I would just stick with the XLF, which is volatile enough in its own right.


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