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Focus Shifts from Earnings to FOMC


While Friday's strength helped to improve the technical picture somewhat, we are still far from being out of the woods.


Good morning, Minyans,

Well, we're up and at it. Another week has come and we're prepared to do battle once again. All eyes this week will be on tomorrow's FOMC meeting and rate results. We continue to push through one of the most diverse earnings seasons I have seen where stellar performances from the likes of Google (GOOG) and Apple (AAPL) were praised by investors and not-so-hot reports from companies like Caterpillar (CAT) and Broadcom (BRCM) were shunned.

Even though we continue to have many companies yet to report, the shift is now back on the economy and what Big Ben and the boys say. Like the last FOMC meeting, I think trying to predict what they will do, say and how this will be handled by the general market is a game in futility and we are much better off studying the underlying charts.

While Friday's strength helped improve the technical picture somewhat, we are still far from being out of the woods. I would prefer to see some basing after Friday's pop but with the hot open on tap it doesn't look like this will happen, at least in the early going. On the defensive side I will be watching Friday's lows across the board as it will be important for this to hold should we see any weakness. If it does not, we will have to go back to the sidelines and wait it out.

Last week's stocks, Charles Schwab (SCHW) and BlackRock (BLK), are still on the books and looking good. This week I am watching a couple new ideas that include extreme thinster Art's-Way Manufacturing (ARTW) and steel stock Companhia Vale Do Rio Doce (RIO). The former reported outstanding numbers recently, growing EPS by 422% and revenue by 35%. After the strong move on the news, the stock has been sitting idle consolidating the move and now looks prepared to attack the most recent short term resistance level of $24 on its way to possibly breaking to new highs. This is an extremely thin stock so one has to be especially careful, and adjust position size accordingly. I will be looking to start my position on a move over $24.00 that is accompanied by strong volume. RIO, on the other hand, I started on Friday as the stock started to perk up and looks good on a push over the $36.05 area and finally on a break to new highs over $36.22. The Brazilian mining company reported strong quarterly revenue and earnings and looks very cheap, trading at 13 times forward earnings. I will look to add shares on a break over the levels mentioned on strong volume.

It continues to be about balance here, Minyans, and if you find yourself discouraged by the action you are probably leaning too far in one direction or the other. Look to realign yourself to the tape and remain open minded and flexible; anything is possible.
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Position in SCHW, BLK and RIO.

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