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MV Weather Report: Will Earnings Season Bring Rain or Shine?

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

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Financials once again ruled the day as the banks led the market to the downside. The money centers were down on news that Mike Mayo, of Calyon Securities, initiated 11 banks with "underperfom" or "sell" ratings. Two of the biggest losers were Wells Fargo (WFC) and JPMorgan (JPM); oddly enough, these are the 2 better-positioned banks out of the majors.

While Mike Mayo well get credit for taking the banks down, today was most likely just profit-taking - as expected. During a CNBC interview, Meredith Whitney (my favorite bank analyst) reiterated that she wouldn't press shorts in the bank stocks going into earnings. She's been dead right on the banks so far - we should trust her.

Regular readers of this column know I highly value Jeff Cooper's opinion. Here's an excerpt from today's Buzz, about the current technical levels of the S&P 500.

"The S&P's attempt to hold the important 830/833 level (540 degrees up from low) is faltering. The behavior as the Daily Swing Chart turns down on trade below Friday's low of 826.70 will show if there is a change in character in the market, ie if each daily turn down is met with bids. Of course, that observation may not be forthcoming until tomorrow--and a lotta damage can be done in one bar, even if Tuesday should reverse to the upside."

Cooper is right; tomorrow is Turnaround Tuesday, which rarely fails. However, I wouldn't expect a big move in the market; I'd look for something similar to today's trading. The market feels like it is finally starting to consolidate after its big run.

Every trader will also be focused on earnings season, kicked off by Alcoa (AA) tomorrow after the bell. The current estimates for Alcoa call for EPS of -0.58, compared with 0.44 last year, on revenues of $4.07 billion. Alcoa isn't as important as, say, Bank of America (BAC) or Goldman Sachs (GS) - but their report should be a good gauge of economic activity.

For earnings season, popular consensus is that the banks have set themselves up to beat EPS this quarter. While that may be true, the rest of the market certainly isn't set up to crush numbers, by any standard. Think Caterpillar (CAT), Honeywell (HON), or any other industrial company.

The market is extremely vulnerable here, I would much rather be long with the market down 26% into earnings as opposed to up. Just a thought.

All right, Minyans - first day of baseball season means that spring is finally here. I'm off to watch my Angels game.



In memory of our fallen friend and trusted colleague, Bennet Sedacca, 100% of the donations made to the RP Foundation through April will be channeled to philanthropic endeavors consistent with the RP mission, working closely with the Sedacca clan in the distribution of those funds. We thank you kindly for your support as we strive to effect positive change in the lives of children.
No positions in stocks mentioned.

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