The increase in volume was excellent to see yesterday, and that increase in volume added further conviction to the bullish move higher past 1280 resistance.

I argue in favor of a bullish advance past 1301 resistance and this week could very well be the start of that move. 

Chairman of Goldman Sachs (NYSE:GS) Asset Management Jim O'Neill discusses what he calls the January 5-Day Rule...

Under most circumstances, you should strive to condition yourself to seek out hated, cheap investments.

Bank of America (NYSE: BAC) missed earnings estimates badly, and tech behemoth IBM (NYSE: IBM) came in light on sales.

With the stock market decline over the past two months, this earnings season promises to hold a few extra surprises.

On Tuesday the Federal Open Market Committee (FOMC) minutes from last month will be released and third quarter earnings season officially begins with Alcoa (NYSE: AA).

Earnings season got underway with an underwhelming start by Alcoa (NYSE:AA). The company beat on revenues, but missed pretty badly on EPS due to rising costs and weaker prices for aluminum.

There's a rumor making the rounds that EU will forgive 50% of Greek debt and increase the ESFS bailout fund to 2 trillion euros.

Forgive me if I am forced to delve into Europe and its debt again today.

Well, Alcoa (NYSE:AA) managed to meet on earnings, and beat on revenue. All in all, I'd say that's pretty good. I'll also say it's a darned good thing Alcoa came in good. After a day like yesterday, investors needed some good news, or at least some "not bad" news.

The S&P 500 dropped below support at 1,320, though only by a point. Volume wasn't particularly heavy, so we shouldn't read too much into the 1,319 close. In fact, yesterday had all the makings of a bear trap: negative headlines, a drop through support, right at the outset of earnings season.

Of course, we will need to get some more positive earnings news to turn the tide. And we will have to wait for Thursday when JP Morgan (NYSE:JPM) and Google (Nasdaq:GOOG) report.

Now, here's some reader mail.

The market was destroyed yesterday. Volume wasn't meaningfully high, but it was better than the past few sessions. The market ripped lower yesterday morning following concerns that Italy was near a default. And the indices continued to trickle lower into the close.

Most indices finished 2% lower in yesterday's bloodbath. But even that percentage seemed low since most of the stocks I followed declined over 4%.

I can't argue against the strength of yesterday's decline. The selling pressure was strong and it was a continuation of Friday's sell-off. But I can't believe the selling was due to Italy.

The market consolidated last week, as expected, although I would have preferred a deeper pull back. The indices rallied hard into the first week of July, and rebounded a little too far and too fast.

The market has a big week, and month, ahead of it. I would have expected the indices to pull-back more ahead of this week, but the time for consolidation is over.

Investors must decide whether the market will break-out to fresh highs, or tank. The market consolidated last week, as expected, although I would have preferred a deeper pull back.

The indices rallied hard into the first week of July, and rebounded a little too far and too fast. The market has a big week, and month, ahead of it. I would have expected the indices to pull-back more ahead of this week, but the time for consolidation is over.

When it comes to conspiracy theories, and the theorists who theorize them, I definitely fall into the armchair variety. Sure, conspiracy theories can be fun (like The Da Vinci Code), and sometimes there may even be a little meat in the conspiracy bone. For instance, there's no evidence to say that former Treasury Secretary Henry Paulson let Lehman Brothers fail because he didn't like CEO Richard Fuld. But after engineering a buyout for Bear Stearns, I feel strongly that Paulson got personal.

And we can't be sure that the Chicago Merc raised margin requirements on silver to protect big banks short positions. But it makes some sense...

So, I couldn't help but get a little conspiratorial after Friday's dismal jobs numbers. Not one economist got even close to the real number (18K). And after the ADP Payroll number came out, estimates for the government's NonFarm payrolls went up.

Now, we know pretty much any government statistic is suspect. They are usually calculated to give a rosy picture. And the NonFarm Payroll number is especially variable because, as a Bloomberg article notes:

The Labor Department, which houses the Bureau of Labor Statistics, adjusts the employment figures each month to account for things like teachers falling off school payrolls in June and workers finding temporary employment with retailers during the December holiday season.

"There was a big adjustment this month," Labor Department Chief Economist Betsey Stevenson said on a conference call with reporters. "It's an art and a science doing seasonal adjustments and it's really hard to predict."

At a time when we've already seen weak economic data for a couple months, wouldn't it be a good time to be less aggressive with seasonal adjustments? Or does the weak employment number support the Obama administrations budget battles in Congress? It seems to me that austerity is a tougher sell when it could easily push the economy into recession.

It appears that the stock market will stagnate between now and the start of earnings season on Monday. After the sharp rally we saw last week, this is a good thing. Sentiment shifted from negative to positive quickly. And if the market can simply hold those gains, it's a victory.

Alcoa (NYSE:AA) reports Monday. But then we don't get another significant report until Thursday, with JP Morgan (NYSE:JPM). And that's pretty much it.

The following week (July 18-22) is when earnings relay get underway.

In the meantime, employment data released tomorrow and Friday are the next major catalysts.

There's virtually no enthusiasm for Friday's NonFarm Payroll number. The market expects around 100,000 jobs were added in June. That's obviously much lower than the numbers from even a couple months ago.

The largest aluminum producer in the world, Alcoa Inc. (NYSE: AA) outperformed analyst consensus estimates for the first quarter of 2011. Alcoa announced earnings after the market closed on Monday.

And yet, the company’s stock price dropped more than 5% yesterday.

To be honest, I’m not extremely interested in Alcoa’s quarterly earnings report, or any other company’s earnings report either.

I’m far more interested in the fact that Alcoa sold off after announcing a 1 penny earnings outperformance. At the same time, Alcoa’s revenues came up short of expectations.

Typically, when a company sells off after it beats earnings estimates, it’s a sign of a top for either the company in general, or if it’s a bellwether like Alcoa, it could signal a top in the markets.

Why is Alcoa a bellwether? They’re traditionally the first company to report during earnings season every quarter. Obviously, Alcoa’s earnings won’t bleed into IBM’s (NYSE: IBM) earnings – but the market’s reaction to such earnings could.

The fact that Alcoa’s earnings beat expectations but their revenues came up short also suggests that the earnings growth could be signaling cost-cutting or jiggering the books instead of real growth. You can’t fake sales very easily – but earnings can be adjusted and reworked a hundred different ways.

So what’s going on with revenues?

The market reversed early gains yesterday morning to close mostly lower. Volume was fairly light except in the Nasdaq, which had heavier volume as a result of a technology sector downgrade. SPX made

MasterCard Spending Pulse, a data-tracking service, reports that, for the week of April 1, Americans bought 2.4 million gallons less than the year before. Another service, Oil Price Information Service, says that gas stations are reporting sales falling by around 3%.

The best case scenario for falling oil prices is that they fall because supply is ample. The worst case is that oil prices fall because consumers are spending less. That inevitably brings up the fear that economic growth will slow on lower consumer spending. And when growth is already tepid, that’s clearly not good.

The market moved painfully sideways last week. Volume was dismal and the news was dreadfully boring. But the week ended on a positive note. The market rallied off its lows on Friday to get back to

The current P/E for the S&P 500, according to the Wall Street Journal, is 17 and the forward number, based on earnings estimates, is 13. That's not ridiculously expensive, but it's not exactly cheap either. Any impairment to earnings due to higher material or energy costs, or lower consumer spending, would have important implications for stock valuations.

The week is not getting off to a good start for European stocks. Portuguese bonds ticked above the “bailout threshold” of 7%. Readers may recall that both Greece and Ireland requested aid once their bonds breached 7%. For its part, Portugal says it doesn’t need to tap into the EU’s emergency fund. But it’s not always about need. Sometimes it’s about appearance. That was the motivation behind the Treasury’s force-feeding of TARP funds to U.S. banks. And if Portugal can get its rates down, and ease fears that its problems will spread to Spain by taking some loans, it will do so.

Yesterday I gave a somewhat tongue in cheek treatment to the question of whether Alcoa (NYSE:AA) had beaten analysts’ earnings expectations or not.   

 

Intel (Nasdaq:INTC) left no room for doubt. The chip-maker crushed estimates by $0.05 a share, beat on revenues and profit margins and guided higher for the second quarter.   

 

What’s next for Intel? Fixing the housing problem? 

There are some investors who think the significance of aluminum company Alcoa’s earnings is overblown. There are stocks that provide a better measure of consumer spending habits, or otherwise give more insight into the economy’s health.  

 

But because Alcoa is always the first major company to report, it’s numbers are still treated like an omen for the 499 companies on the S&P 500.  

 

So, if you ignore one-time charges, Alcoa (NYSE:AA) reported $0.10 a share 1^st Quarter profit yesterday afternoon. I would swear I read on Yahoo! Finance that analysts were expecting $0.11 a share. That would mean Alcoa missed estimates.

Finally. Greece has been offered a lump-sum loan by the European Union. It’s been obvious for weeks that this needed to happen. Now that it has, at least we can look forward to not reading about this saga every day.   

 

A month ago, this Greek bailout might have been a significant catalyst for the stock market. Now, after the seemingly endless back and forth, there’s not much impact beyond a rally for Greek banks and bonds.   

 

From a trading perspective, the Greece news is being overshadowed be earnings season… 

The Dow set a new record close while the small cap index stumbled on a day when news of a merger in the aluminum sector occupied investors’ minds.  Among specific Russell 2000 stocks, analysts lowered ISTA Pharmaceuticals, Inc.’s (Nasdaq: ISTA) target price while shares of Cell Therapeutics, Inc. (Nasdaq: CTICD) moved up on news of a fast-track status from the FDA.

The Russell 2000 lost 1.01 points, or 0.12 percent, to 831.87.  The Dow Jones Industrial Average closed in record territory for the fifth day in a row, adding 48.35 points, or 0.36 percent, to 13,312.97.

U.S. stocks are trading just above the flat line after news of a planned buyout in the aluminum sector.  Among small caps, shares of Rocky Brands Inc. (Nasdaq: RCKY) are rising on news of a stronger-than-expected first quarter, while disappointing earnings are hurting Entegris, Inc.’s (Nasdaq: ENTG) stock price.

At 11:28 a.m. ET the Russell 2000 had added 0.64 points, or 0.08 percent, to 833.52.  The Dow Jones Industrial Average was up 33.32 points, or 0.25 percent, to 13,297.94.

Stocks are gaining shortly after the opening bell, following news aluminum producer Alcoa Inc. (NYSE: AA) plans to buy its rival Alcan Inc. (NYSE: AL).

At 9:51 a.m. ET the Russell 2000 had added 1.09 points, or 0.13 percent, to 833.97.  That’s above its record close of 833.80 on April 26.  The Dow Jones Industrial Average was up 36.32 points, or 0.27 percent, to 13,330.94.