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Randoms: Fundamental Cause and Flaws

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Earning Season offers ammunition on both sides of the ride

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  • A face for radio and some words of wisdom.

  • As we entered earnings season-and Goldman Sachs (GS) earnings in particular-we offered that this would be the best quarter in years, either way. Given the government backstop (in many ways, shapes and forms), the barn door was open for these companies to gallop in green fields.

  • As we reflect on the fundamental state of the union, there have indeed been some strong stories. Goldman, Caterpillar (CAT), IBM (IBM), Apple (AAPL) and Intel (INTC) stand out, although some had flies investors chose to ignore (Mr. Practical delves into this here and here).

  • The two reports that stand out this morning were Mother Morgan (MS) (all three divisions lost money) and Wells Fargo (WFC) (bad loans jumped and assets no longer collecting interest climbed 45%, according to Bloomberg).

  • Those punk piggies, coupled with less-than-stellar quarters at Google (GOOG) and General Electric (GE) (something still feels funky) beg the question: If not now, when, and if not you, who?

  • As is always the case, the reaction to news will be more telling than the news itself.

  • Given the proximity of S&P 955 and the widespread anticipation of a whoosh higher, prudence is warranted as we edge ahead and make our bed. The greatest trick the devil ever pulled was convincing the world a breakout (or breakdown) is imminent.

  • I've been trading around some short-side exposure but consistent with recent banter, I'm in the process of paring risk as I'm traveling tomorrow for business (and some blackjack with my grandmother).

  • I am, however, keeping some out-month out-of-the-money puts on my sheets with an eye towards the "W."

  • Speaking of which, Marty Feldman, er, Feldstein-the President Emeritus of the Nat'l Bureau of Economic Research-is officially in the "W" camp as well.

  • As I often say, you can pick the direction or the timing but you'll rarely nail both. That's top of mind as I operate with my stylistic approach, but the progression-the dreaded double dip-continues to crystallize.

  • I'm not trading the trannies but I'm certainly watching them. Why? Dow Theorists are a flutter that if they break above TRAN 3400, it would "confirm" the next leg higher. Drawn with a crayon rather than a pencil, I'm watching TRAN 3450-3500 as the zone bar.

  • I mentioned yesterday that we've got CNBC on in the hallowed halls for the first time in two years and it sure does bring back memories! Talk about being a "bit" early, I'll never forget the weird looks I got when I warned of the cumulative risks of debt and derivatives building behind the scenes.

  • In terms of the here and now, the tape is slithering sideways directly at the most important level of the year. While breadth is balanced and green seeds persist (Apple, the Semis and homebuilders stand out), banks are trading under the 50- and 200-day moving averages and big beta is laggy despite St. Stephen's rose of a quarter.

  • Keep an eye on Mother Morgan, which is slinking back towards the flat-line. If she can flip the upside switch, that could shift psychology at a time when psychology is paramount.

  • Think positive, Minyans-it could be worse...you could be ordinary!


R.P.

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