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MV Crime Report: Caterpillar Poisons the Market?


Rain or shine, we review the day's biggest stock stories.

Once again, Goldman Sachs (GS) stole the spotlight: The firm came out with a bullish call on the US equity market. The firm raised its year-end target for the S&P 500 to 1060, up from 940. Goldman also raised its 2009 and 2010 S&P 500 EPS target to $52 and $75 -- a 30% and 19% jump, respectively, from previous estimates.

The call lifted the S&P 500 by 1.14%, to 951, as traders got behind the bullish call. Who can blame those traders who bought today? If Goldman Sachs says the market is going higher, I have an eerie feeling that it will. Just a hunch.

Today on the Buzz and Banter, Kevin Depew gave his take on the S&P 500:

"The open was above last week's close and now we have the market tick above that open, completing the qualification process for the breakout above the TDST Up level on the weekly chart. This suggests the trend has changed to up on a weekly basis. How to play it?

"Dialing down to the daily chart, we are currently on bar 6 of potential 9 sell setup. One could of course clumsily barge into the market here to take a position, but before we decided to that let's do the following: 1) cover any existing short positions related to broad equity market movements (as opposed to special situation shorts) 2) identify areas of upside projections and downside entries.

"TD Absolute Retracement Up gives us a couple of key projection levels. First, the 944.43 level has been qualified, basis S&P 500 cash index. The next higher level for TD Absolute Retracement Up is 1025.07. As well, there is a TD Propulsion Momentum Up level on the daily that today is now qualified. The TD Propulsion Up Exhaustion target is 1014.04.

"An additional thought on entry: we need a close lower to setup a potential qualified break of the daily TDST Up Level at 946.21. A couple of other short-term TD indicators point to the possibility we get a move to ~900 or slightly below as an acceptable retreat from this point.

"Bottom Line: There are bullish qualified breaks on both daily and weekly time frames."

The S&P is currently perched right on the important 950 level. This level has served as significant resistance; it's ended a few rallies over the last 3 months. To get a breakout, bulls are going to need help from companies reporting earnings.

If we're going to spring above the 950 level tomorrow, Caterpillar (CAT) will play a big role, as the company will be out with earnings before the bell. The previous quarter, Caterpillar reported revenue that fell 22.5% year over year and lowered its full-year EPS guidance.

Investors don't think CAT will fare much better this quarter, as the manufacturing sector is still sluggish. Current analysts' estimates call for EPS of $0.22 on revenues of $8.8 billion. Investors will be paying most attention to CAT's call for the future: Is the economy really that bad? How is government stimulus (CAT is a global company) affecting it?

The market would love a strong quarter out of CAT, but tomorrow is also Turnaround Tuesday -- so we should know better by now. Keep your eyes peeled for more earnings reports, as they can move the market too.

Before the bell: Coca-Cola (KO), Dupont (DD), Freeport McMoran (FCX), Peadboy Energy (BTU), Merck (MRK), Schering-Plough (SGP), State Street (STT) and United Technologies (UTX).

After the bell: Apple (AAPL), Gilead (GILD), Starbucks (SBUX), and Yahoo (YHOO).

Have a great night!
No positions in stocks mentioned.

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