Courtesy of Phil over at Phil’s Stock World
Whee, what fun!
We got the S&P stick that kept us well and truly above 946 into the close. If we hold it for a couple of days, we won’t be calling it a “stick save,” we’ll be saying this was the day that 946 turned from resistance to support – a good chatist needs to travel to the future, look back at today’s charts and think about them in context of the follow-through move they expect. Looking further back in time, however, what we have so far is a double top on the S&P at the upper end of our primary range on very low volume. 956.23 was our June high and that still needs to be both taken out and held (preferably at decent volume) in order for us to don our rally caps for the next leg up.
I’m encouraged this morning that we may be able to do it though – CAT had great numbers, beating estimates of .22 by .38 per share, that’s very impressive for what was a $35 stock yesterday. Fellow Dow component KO had a nice beat as well as did DD, MRK and UTX, That’s 5 Dow beats in one day and yesterday we finished at 8,848 which is why I’m saying 8,900 or bust today. If we can’t add 52 little points on these earnings, then surely the rally into these earnigns was overdone. If, on the other hand, we can hold 8,900 and build from there – then perhaps we are ready to move 8,650 to the bottom of our range and look to make a 10% move over that to 9,500, a mere 32% off the highs.
I’m excited because it’s almost time to pull out a brand new Big Chart with all new targets – if only we can prove this move is real. Let’s not get too ahead of ourselves but I was already very pleased with last night’s eanings when all 20 reporting companies beat estimates with PKG and TXN raising guidance of all things! This morning we also have both ICSC and Redbook Retail Sales reports and Bernanke gives the old Humphrey-Hawkins address to Congress against a very pretty market background which will hopefully overshadow TARP Czar Neil Barofsky, who will be reporting to Congress under the shadow of his “leaked” report that shows that the government’s POTENTIAL exposure under TARP is now $23.7 TRILLION. To get to that figure, Mr. Barofsky combined direct spending with all the government guarantees and programs and assumes the “gross exposure” the government could face if all the programs were tapped to their fullest potential. It’s funny but I don’t recall Paulson asking Congress for $700Bn so we could assume $24Tn in debt obligations…
It kind of puts California’s $26Bn debt in perspective as that’s just 0.1% of the TARP obligation but, unlike the US, California seems to have finally reached a deal to get their budget under control. The deal, reached by legislative leaders after two months of frequently acrimonious negotiations, would slash spending for schools, public works and welfare programs amid the longest recession since the 1930s. If approved by the full Senate and Assembly, the agreement will also siphon money from municipalities, force companies and individuals to pay income taxes sooner and make it more difficult to receive state aid. “We came to a basic agreement, a budget agreement,” Governor Schwarzenegger told reporters outside his office last evening. “This is a budget that has no tax increases and this is a budget that is cutting spending and it deals with the entire $26 billion.” deficit.”
California’s neighbor to the East and major trading partner, Japan, was quite pleased with the news this morning as the Nikkei came back from a long weekend and jumped up 2.7% this morning. There was never any doubt at the 9,500 line as the index gapped right over it, did a mid-day test but then had a hell of an afternoon, adding 150 more points to close at the day’s high. Tech stocks led the rally in Asia off good TXN earnings last night but the Hang Seng went flat and the Shanghai fell 1.64% but that is what we expected going with FXP protection as China, of all the world markets, seems to be a bit ahead of itself. ”Much of the equity gains have come on declining volume, [indicating] confidence is still tentative,” said analysts at UBS. “We ultimately think the gains will prove unsustainable on a three-to-six-month” basis. ”Investors should consider taking some money off the table as we expect this rally to be interspersed with some pullbacks,” said CIMB.
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