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WHAT I AM WATCHING THE WEEK OF APRIL 19

04/19/2010

Obviously, as I stated on the evening of Friday April 16, the most critical indicator for the week of April 19 might just be the reaction to the SEC / Goldman Sachs news as Asian markets open Sunday evening April 18.

Clearly, if Friday's negative momentum extends into Asian trading, the early part of this week will have the U.S. capital markets on the defensive. A deeper decline in the S&P 500 Index will find support at the 21 day moving average @ 1181.34. Below 1180 selling could intensify toward the 50 day moving average @ 1140.56. However, we should know rather quickly if enough underlying support remains to reverse the bearish momentum from last Friday's trading session and takes the S&P 500 right back to its 52 week established on April 15 @ 1213.92.

 

 

Source:  Bloomberg

The week of April 19 will have 36% of the S&P 500 Index reporting earnings. Clearly last week's earnings were highlighted by UPS' beat and raise. I point to UPS as further evidence the recovery is closer to a V than any other letter.

Let's get out of the way the one report everyone is talking about - at 8am on April 20 Goldman Sachs will release its earnings. More importantly, at 11am, the conference call begins - good luck getting on that one. Beyond the GS drama I am watching:

Monday April 19: Citigroup (C) and IBM

Tuesday April 20: Johnson & Johnson (JNJ) and Regions Financial (RF)

Wednesday April 21: McDonalds (MCD), Morgan Stanley (MS), and Freeport McMoRan (FCX)

Thursday April 22: American Express (AXP), Microsoft (MSFT), and Amazon (AMZN)

Friday April 22: Ford (F)

Let me summarize why I selected these names out of the 128 SP 500 companies reporting this week.

 

If you notice I didn't select any Energy names and yes we will receive a few Oil service and Coal names. But I know the story there, investors should as well. The fundamentals are sound and will remain sound.

 

The 11 names I selected above will provide us insight whether we are reaching "Earnings Exuberance Exhaustion".

 

Have companies such as F, MCD, AMZN, JNJ and IBM reached the point where the upside surprises in earnings just are out of gas, so to speak. I have also selected 4 critical Financials for the sole purpose of measuring the improvement in credit quality and provisions for further write downs. Finally FCX should answer several of the doubting questions surrounding what the real China story is.

 

Try and keep your read through of Earnings simple. Look for answers to the overwhelming questions that cast doubt on this recovery. Don't focus on what we already know. In addition, gauge the sentiment of the overall market to determine if we are collectively just getting "too giddy".

 

On the Economic front as always I anticipate Wednesday's Oil inventory report.

 

I am also watching Wednesday morning's MBA Mortgage Apps, which is beginning to weaken. Notice the average for the past year is -1.2, the past few weeks we have slipped below that marker. Worth watching, in particular with removal of Fed support for the MBS market. However, keep in mind Chairman Bernanke stated this week the Fed can step back in again at any point if the need arises to support the mortgage market again.

 

 

 

 

Source:  Bloomberg

Initial Jobless Claims
are also surprisingly headed the wrong way. On Thursday April 22 at 8:30am the consensus is for 450,000 claims versus last week's 484,000 claims. Notice the circle I have drawn on the chart below. Jobless claims are headed in the wrong direction. We need to keep the claims below 500,000.

 

 

 

Source:  Bloomberg

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