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Stock Market Consolidation Ahead Of Earnings...

Stock-Markets / Stock Markets 2010 Apr 11, 2010 - 05:55 AM GMT

By: Jack_Steiman

Stock-Markets

The market is relentless. No fun being a bear the past many months. Every time the market flashes a near-term get out of dodge signal, the bears can't seem to make it happen. All overbought conditions barely unwind before heading back higher. All negative divergences get ignored. It's bizarre. It's more than unusual, but it is what it is. A powerful bull market not seen since 1999.


Nowhere near that good, but not much can come near what we've seen off the S&P 500 666 lows. From 1045 on up it's been more of a grind, but up, nonetheless. It's natural for the market to grind once you are dealing with the current market conditions I just spoke about, but still no major selling has taken place. It will, of course, at some point, but until you see the right reversal on the right internals, why fight the tape. Staying with the trend is the only way to play it.

It's always about earnings and that's what's on deck starting Monday with Alcoa Inc. (AA). They always report first, and they are truly a laggard. The stock has been under intense pressure lately because the street sees bad things from them. AA, however, is not the market. The market seems to love what it has seen and clearly likes what's coming. Earnings often stop a strong advance and we have to be on guard for that.

Maybe once earnings are really out there the market will cool off but that doesn't mean the bull market will end. It could be the perfect place for the pause this market really needs. Earnings have driven this market up thus far and it's my guess that once this earnings season is over, they'll carry us higher still. No way to know that for sure but that's my thinking for now. The way retail sales are coming in it seems that most companies will be guiding higher. If that does happen, the bears will find taking this market down a difficult task for quite a bit longer.

The market started a bit higher and spent the crux of the day grinding as usual. The new normal every day fight between all dips being bought and too overbought to go much higher, especially with those negative daily divergences thrown in. Grinding teeth or fingernails scratching a blackboard is what it's like.

At the very end of the day the market did take a nice little step upward, closing at the highs. Solid action for a mostly flat week. It feels better than flat because there really isn't any significant selling and because we've been on a very fortunate run with alerts. A solid day and really a solid week as all the negatives still didn't bring any sustained selling.

We all know the risk of holding stocks in to earnings and with next week full of them, it's time to know when each company reports so you can make a decision about whether you want to play Russian roulette. Some stocks will blast off. Some will get blasted. Do you want to be part of that game? Just know and understand the risk, please. Some stocks will sell because they're full short-term, but that doesn't mean they're done going higher.

I keep a very full scoreboard on each stock and whether the street liked or disliked their news on earnings. The ones that are treated kindly on their reports usually remain in their up trend for several months. The ones crushed should be avoided. The ones that are full and trade laterally can be bought after a few weeks if digestion. I'm on top of it. Some big boys and girls next week on the earnings front. Intel Corporation (INTC), Google (GOOG), Bank of America (BAC), JP Morgan Chase (JPM) and many others. Now the fun begins.

We're in a bull market, but an advanced one short-term. It is possible we see low 1200's on the S&P 500 before any selling hits in earnest. No way to really know but there are inverse patterns on the 60-minute time frame charts that suggest this is realistic. Either way, remember to stay with the trend.

Peace

Jack

Jack Steiman is author of SwingTradeOnline.com ( www.swingtradeonline.com ). Former columnist for TheStreet.com, Jack is renowned for calling major shifts in the market, including the market bottom in mid-2002 and the market top in October 2007.

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