Market Recap

After last week’s 1.7% gallop in the SPX, the markets had an “up and down” ride and settled near their closing levels of last week. The market showed its resiliency on Tuesday shrugging off poor results from American Express (AXP) and Wachovia (WB) and inducing a good bout of short covering. The violent nature of these advances is very typical of bear market rallies when the market is heavily shorted.

Given the drastic measures from the government I feel this rally still has some room to run especially given crude’s retreat. The financials will be a key element to this latest advance and feel the XLF will retest 24, which is the bottom-side of the January and March lows. This would coincide with the SPX reaching the 1325/1350 zone, which is where its 50 dma currently sits. My firm feels this is the most probable spot where the latest advance will stall. Risk levels are still extremely high (see AXP’s report). Keep risk defined and above all else be patient.

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Top Headlines

Oil prices continued their downward trend this week falling below $123/barrel a level not seen in weeks as gas prices fell to $4/gallon. The demand side of the equation is now being called into question as the U.S. economy slows. (7/25)

Genentech (DNA) said it will take no action for the time being until a committee reviews Roche Group’s $89/share offer. (7/25)

Shares of GSE’s Fannie Mae (FNM) and Freddie Mac (FRE) fell Friday despite lawmaker’s efforts to rescue the struggling firms. (7/25)

Fast food giant McDonald’s (MCD) posted strong earnings boosted by overseas sales and solid domestic results as consumers turn to cheaper dining alternatives. (7/23)

Apple (AAPL) posted strong results, but investors were a bit skittish on its outlook. Nonetheless, shares rebounded after a sharp drop-off early Tuesday. (7/22)

Perhaps the worst earnings report to date, American Express (AXP) posted a horrible quarter, a sign that the consumer finance picture continues to deteriorate. S&P lowered its outlook (7/24)

Bank of America (BAC) reported a 41% dip in quarterly profit, but it easily beat Wall Street estimates. The company also said its dividend is safe and will look to buy back shares in the near future. (7/21)

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