The Most Important Earnings Report is Tonight: How to Profit

After the closing bell, tech giant Cisco (Nasdaq:CSCO) reports earnings
for the latest quarter. And what Cisco says about business spending could
decide the stock market’s direction for the next three months.

Cisco makes Internet routers, which deliver Internet information across
corporate networks. Nearly all of Cisco’s sales come from corporations.
So when corporate spending is growing, Cisco knows it.

Earnings and the Dollar

Earnings season really gets moving this week as we hear from
heavyweights Bank of America (NYSE:
BAC), IBM
(NYSE:IBM)
Apple (Nasdaq:
AAPL), Goldman
(NYSE:GS), Yahoo (Nasdaq:
YHOO), Johnson & Johnson (NYSE:JNJ), Morgan Stanley (NYSE:MS), Wells Fargo
(NYSE:
WFC), and eBay
(Nasdaq:
EBAY).

Citigroup (NYSE:C) reported this morning, and its earnings
news was similar to JP Morgan’s (NYSE:
JPM): both companies beat expectations by a few
pennies a share, but much of the improvement was due to smaller loan loss
reserves, rather than strong improvement in operations.

A Sales Call to the Government

Technology can fix anything: even the Federal government’s
deficit. At least, that’s what the Technology CEO Council told White House
officials yesterday. The council, headed by IBM (NYSE:IBM) CEO Sam Palmisano
said investments in efficiency technology could save the U.S. government $1
trillion over the next 10 years.

Of course, the meeting was basically just a sales call. And
seeing how much loot the government’s been doling out, I wonder what took
them so long.

Can Bank of America Break $14?

I’m still miffed at Fed Chief Ben Bernanke for not speaking
with confidence about the U.S. economy. For a group to succeed, it must have
confidence that it can succeed.

Generals know this. Coaches know this. But for some reason,
Ben Bernanke just can’t bring himself to give the economy a vote of
confidence.

But perhaps he’s competing with the Bank of Japan and
China’s government in the great race to the bottom for currency
valuations.

You Shall Not Pass!

The S&P 500 is at a very interesting spot. On Monday, September 13, it
gapped up and ran above resistance at 1,120. It’s dipped below that level every
day since. But the bulls have rallied and closed the S&P 500 above 1,120
every day.

The S&P 500 is consolidating recent gains above an important
support/resistance point.

This is exactly the kind of action I like to see. And the trading floor guys
and the talking heads on CNBC are all buzzing that this rally might have legs,
these gains might stick.

What Will Obama Say?

Yesterday, buyers mustered the strength to build on
Wednesday’s strong rally. In fact, the bulls pushed the S&P 500 above a
key resistance point at 1,085.

I’ve talked at length about how pessimism was at an extreme
and a bounce for stocks looked likely. Recent economic data has been good
enough to support the notion of an economic recovery, and while not setting
records, it is at least strong enough to avoid a double-dip of
recession.

Most of the recent data was in line with expectations:
factory orders were up 0.1%, productivity was down 1.8% and labor costs were
up 1.1%. However, Wednesday’s strong new home sales for July (up 5.2% when a
loss was expected) was probably the single most important data point.

The Truth Behind Tech Revenues

Up, down, up down. To say that the stock market has been
volatile over the last week is like saying King Kong was big monkey. It’s
true, but it doesn’t really give the complete picture.

Investors and traders really don’t seem to know what’s
coming next. I’ve tuned into
CNBC a few times during the trading day recently, and you can see the
frustration on the commentators’ faces. It’s as if they know that, no matter
what they say, they will be wrong.

This market is experiencing indecision in its purest
form.

What? BP’s not American?

That was an excellent rally yesterday! The S&P 500 broke through important resistance at 1085. For more insight, I will turn to my trusted sidekick, technical analyst for TradeMaster Daily Stock Alerts Jason Cimpl…   

 

After the weakness on Tuesday, I was beginning to doubt the bulls ability to take the market higher. The group came through yesterday and took back 1085, which needs to become support. Volume was low again, but internals were commendable as buyers out numbered the sellers by 5 to 1. Today the big resistance to watch will be 1103 and 1115. SPX 1103 stopped the market dead in its tracks last week. Stronger lateral resistance exists at 1115 which dates back to December 2009 and is also the 20 DMA and gap resistance.   

Are the Sellers Done?

So far this year, the S&P 500 has dropped 3% or more in one session 3 different times. The two previous times, it clawed back some of the losses over the following week. We’ll have to wait and see of there is any upside after yesterday’s big drop.   

 

The S&P 500 is now testing the lows from the “flash crash” on May 6. This is interesting because it was assumed that trading that day was something of a fluke as computer trading programs went haywire. But now that stocks are back to those levels, we must consider that the drop may not have been a fluke.  

 

The question now is: can stocks find some strength? Or perhaps a better way to ask the question is: are the sellers done?   

Financial Darwinism

As Germany voted to approve bailout money for Greece, German Left Party lawmaker Gesine Loetzsch was quoted as saying "Speculators are Taliban in pinstripes, and people in our country must be protected from these Taliban…”  

 

It’s scary to me that any political leader could voice such an inflammatory and downright naïve opinion.   

 

If a hitter in baseball can’t hit the high fastball, then that’s exactly what he will see until he makes an adjustment. When Yahoo! failed to take advantage of its early-mover status on the Internet to implement a viable paid advertising model, it opened the door to Google.