Itz Week End Review 1-23-11

 Subscribe in a reader
Bookmark this on Delicious

Well just like the UConn Women's basketball team's 90-0 streak came to an end...so did the S&P500 & NASDAQ at seven-weeks. Even with Apple's highly expected good earnings; doing better than expected...it too succumb to profit taking. Itz has highlighted in past posts that the 1,300 level on the S&P 500 would more than likely present an opportunity for some to take some money off the table. The commodities sector to it on the chin hard this past week. Gold prices headed south as did the dollar and that is not supposed to happen. Concerns over China's inflation cure, the hike in margin on futures contracts at the CME, worries over potential position limits and a serious need for a correction. Traders are also anticipating the end of the QE2 program as the economy improves. Gold rises on cheap money. However, rising interest rates push the value of the currency higher and that is what traders are expecting in China and several other countries. Global inflation is rising and that means higher interest rates. Doug Kass believes gold will decline -$250 from its highs before finding support. Take a look at this past Thursday's post for Itz commodity charts.
For the coming week, Tuesday night President Obama has his State of the Union Address. This should be interesting to say the least. First, just to see the bipartisan reaction since the November shellacking & the AZ shooting. Secondly, the tone of the president, having just appointed Jeff Immelt to head the president's new Council on Jobs and Competitiveness, an advisory group on economic policy. 
The real market focus next week will of course be the acceleration in the pace of earnings. There are 128 S&P-500 companies reporting next week. The big reports of the week are AXP, MCD, JNPR, MMM, ADP, UTX, AMZN, MSFT, F, HON, CVX and COP. 
On the energy front, crude oil continues to hover around $90, as the US enters the statistically coldest part of winter. Interesting just prior to Friday's close the weekly Commitment of Traders Report numbers came out. Nymex light sweet crude commercial traders increased their net short position to -210,000, one of the highest levels in several years. >>LINK They've been adding to their short positions as oil prices have risen, should things reverse, expect crude oil to see a significant correction.

Bottom line the week ahead should be volatile,  as traders digest the full calendar of economic events, a FOMC meeting and several hundred earnings reports. This could be a pivotal week and there is risk to the downside as post earnings depression settles in. Market sentiment is still bullish but it has weakened to a more tolerable level.

Hedge fund manager and New Jersey resident David Tepper isn't hedging his bets in today's market. He believes investors need to be cautious as well as optimistic.
"It's not a free ride in the market," he said. "We are at a higher level, but pretty darn good. So you can't be too negative but you can't be uncautious."