The week started off with a bang with IBM (NYSE: IBM) blowing out their 4th quarter earnings numbers posting an EPS of $4.18 per share compared to an average forecast of $4.08 per share. The week also saw solid earnings out of Apple Inc. (NasdaqGS: AAPL) and Google Inc. (NasdaqGS: GOOG) however, this must of been the case where the earnings were already priced into the stock prices for these particular equities sold off this week and took the Nasdaq down with them.

A mixed bag with the banks as well, on one hand you had JP Morgan Chase & Co (NYSE: JPM) report a very impressive quarter but on the other hand you had Bank of America Corp (NYSE: BAC) reporting a significant loss. So what does all this mean for the markets and where do we go from here? Well to me its seems like we are going to be in very choppy waters over the coming months awaiting the next catalyst(s) to guide the direction of the markets. The Nasdaq appears to be in the first leg of a modest correction and the Dow and S&P 500 continue to be supported by the broader results of this earnings reporting season.

Let’s see what next week has in store and until then have a great weekend.

~George

With the Dow finishing up another 1% last week to close near 11800, can the industrials break through 12000 this week? Well, there are three major Dow components reporting their earnings this week: IBM Corp (NYSE: IBM), General Electric Corp (NYSE: GE) and Citigroup (NYSE: C), so indeed this could be the catalyst that places the Dow above 12000. There are other major banks reporting their earnings this week as well such as: Bank of America Corp (NYSE: BAC) and The Bank of New York Mellon Corp (NYSE: BK). If any sector has lagged in this bull run it has been the banking sector. If banks can begin to demonstrate strength and stability, we may be looking at Dow 13000+ and the S&P 500 1300+ by year end. (?)

Interesting development today out of Apple (NasdaqGS: AAPL) ahead of their earnings report tomorrow. There is a report out that Steve Jobs is  taking his second medical leave in as many years to focus on his health. The last time this type of news was circulating and reported, Apple’s stock took a significant hit before recovering. This in fact may be the excuse that investors and traders may use to sell off the markets a bit, and if so, this could create an opportunity that some other investors have been waiting on.

Have a safe and prosperus week.

~George

After the bell, Intel (NasdaqGS: INTC) reported a record year and higher than expected earnings with a whopping 4th quarter net income of $3.4 billion or 59 cents per share. The street had been expecting 53 cents a share. What also stands out to me is the company experienced top line growth and also gave a stronger outlook for the current quarter. The 4th quarter earnings were derived from revenues of $11.5 billion compared to $10.57 billion for the year earlier period. In one of my previous blogs at the end of last year, I eluded to the need for top-line growth as one of the key factors for the current market rally to continue. Now I know this is only one company reporting and indeed it’s encouraging to see some top-line growth, however this trend must continue on a much broader scale.

Next week you have got other Tech Titans reporting such as Apple Inc. (NasdaqGS: AAPL) and Google (NasdaqGS: GOOG) along with options expiriation. So I expect a very volatile week ahead and hopefully a very profitable one as well. Good luck to all.

~George

The first Dow component reported a solid fourth quarter with earnings coming in at 24 cents per share or a net profit of $258 million. Furthermore, Alcoa Inc. (NYSE: AA) is forecasting that global aluminum demand will grow at 12% in 2011 and the company is also optimistic on the United States. Why I like to view Alcoa as a barometer for the economy is that its business serves customers in many sectors such as automobiles, construction and consumer products just to name a few. Alcoa’s shares are off a bit in the after-hours session however the stock has moved up 50% or so in recent months so no surprise that the common is a little weaker after the report.

The after hours action is something to pay attention to as the reporting season continues. There is a strong possibility that when other companies do come out with their results, profit taking may occur and/or the earnings results may already be priced in (?)

Let’s see how Alcoa closes tomorrow to see if this trend continues. Tech titan Intel Corporation (NasdaqGS: INTC) is due to report their quarterly results on Thursday which should set up the Tech sector.

Have a great week.

~George

Earnings reporting season kicks into high gear next week with Alcoa Inc. (NYSE: AA) reporting after the close on Monday. All eyes and ears will be on what the company has to say regarding the health of the economy from their vantage point and what they forecast for the future. In fact, there are high expectations from the street across the board as to what most companies will be reporting in their results and what their outlooks are.

For me, earnings and outlooks will be a huge catalyst in whether or not equities continue to advance or if we see the correction that the short sellers have been waiting on for months now. My position is to wait to see how earnings play out and what the forecasts truly are before any meaningful investments are made.

Have a great weekend.

~George

Stock indexes rang in the new year with gains across the board. The 3 major indices all posted respectable gains today while reaching multi-year highs. The Dow closed up approximately 93 points, the S&P 500 up 14 points and the Nasdaq posted a gain of +38 points. However, the highlight of the day was the small caps, which notched the highest percentage gain of 1.98% in the S&P Small Cap 600 . In fact, the small caps also led the way last year with gains of over 20% outpacing their maturer brethren.

My goodness! This sounds like a broken record: markets up, gold up, fresh 52 week highs, etc. This bullishness has me a bit concerned here in the short term. Certainly, stocks can remain overbought or for that matter, oversold for extended periods of time. One of the metrics I refer to is the VIX index which acts as a fear gauge. The VIX index is almost at 52 week lows which means that investor sentiment is exceptionally high. The lack of investor fear and complacency could be a catalyst for the market to correct. The last time the VIX index was this low was in April/May 2010 right before we saw a 10% correction in the markets. Now I am not suggesting that this will occur again, however, historically speaking when the fear gauge hangs around these low levels, the markets tend to experience a pullback.

Having said this, if a pullback does indeed occur, this would be very healthy for the market which essentially has gone up in a straight line over the past few months.

Have a very prosperous week.

~George

The book is closed on 2010 and what a year it was! The final numbers are in: the Dow Jones Industrials gained 11%, the S&P 500 gained 12.8%, and the Nasdaq gained a whopping 16.9%. Congratulations to all of the bulls out there.

So how will equities fare in 2011? Could there be an encore performance in stocks? In my humble opinion, for the markets to have a repeat performance, we must see the unemployment rate come down significantly. This means corporations must be willing to hire and expand, enabling the consumer to start spending again. These three catalysts are essential for a meaningful economic recovery and to keep the markets appreciating.

Have a great trading and investing new year.

~George

And what a year it has been 🙂  That is, if you like volatility? We have witnessed market swings of 10% or more and in some instances this volatility occurred within a 3 month time period. Nonetheless, it appears that the major indices will end the year with double digit gains or certainly close to it. Seemingly, the economy is also demonstrating stronger signs of recovery as the consumer is spending more and job market gains are occurring. One may think that this should bode well for equities in 2011 and really be a boost to commodities in the new year. However, how much of this is already factored into stocks and commodities?

For me, that question will be answered as companies report their earnings results in 2011 and within those results I will be looking for top-line growth. Yes many of these companies have done exceptionally well this year with their bottom line results, which in turn has increased profits and cash on their balance sheets. However, most of these balance sheet gains have come from management running their companies better and more efficiently which includes higher productivity. However, the negative effect of such efficiencies has been corporate layoffs. So the minute I see consistent top-line growth which includes hiring, I then can get more comfortable in believing that this market rally can continue in 2011.

Have a great week.

~George

The Dow, S & P and Nasdaq all hit new 52 week highs today. In fact the S & P 500 closed at its highest mark since September 2008. What does all of this mean? Could this be the result of year end window dressing? Now that the S&P 500 has closed above 1250, could this be the technical breakout that everyone has been looking for? Or could this be the result of a bullish call today from the chairman of asset management at Goldman calling that 2011 could be the “Year of USA”?

I think it’s a combination of all of the above and then some. I know it is hard to believe that with the economy continuing to struggle and with the incessant high unemployment rate that America continues to endure, you ask yourself, how can stocks continue to lift? Let us not forget that markets tend to be forward-looking mechanisms and just maybe 2011 will become the “Year of USA”.

Have a great evening.

~George

Stocks continue to head higher as we close out the trading week with the Dow, Nasdaq and S&P 500 all flirting with 52 week highs. To add fuel to the fire after the bell Oracle Corp. (NasdaqGS: ORCL) reported their earnings with total revenues up 47% and a whopping $1.87 billion in profits. This should bode well for the Nasdaq tomorrow and keep the rally in techs going. Not only are the large caps performing well this year, but the small cap marketplace is actually outperforming their brethren. The Russell 2000 Index a small cap barometer is up over 20% year to date in yet another sign of optimism in the overall markets.

If you have been long this market congratulations for you have been on the right side of the trade for sometime now. Let’s see how this year wraps up and see if this powerful rally continues through the holidays.

Have a great weekend,

~George