A rally in the face of negative press is bullish. The optimism could be short lived, but the bullish momentum remains despite gloomy news reports.

With weak earnings from the banks and minimal economic data to embrace, I took a bearish position yesterday.

Groupon (Nasdaq: GRPN), the online leader in daily coupon deals, launched the largest IPO by a tech stock since Google (Nasdaq: GOOG) raised $1.7 billion in its 2004 stock market debut.

Investors had expected the worst from the banks, which is why the financial index was down 30% since May. The market will not be able to break 1250 resistance and rally higher without the bank stocks.

Big bank stocks were hit hard. The decline followed a bland earnings report from big banking leader, JPMorgan (NYSE: JPM), which promptly resulted in similar declines to big bank competitors: Goldman Sachs (NYSE:GS), Citigroup (NYSE:C) and Wells Fargo (NYSE:WFC).

While I don't view Greece as an issue, a slowdown in Europe would be a big deal.

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).

The risk for Europe is not doing enough. If you give Greece debt forgiveness of 30%, but Greece still can't make its payments, then you haven't really accomplished anything.

Google (Nasdaq:GOOG) knocked it out of the park last night. The company earned $2.7 billion on $9.72 billion in revenue for the third quarter. That revenue number represents a 33% gain over last year.

Jack Ma, the chairman of the Chinese Internet conglomerate Alibaba Group, said last week that he is "very interested" in buying Yahoo! Inc. (Nasdaq: YHOO).

The market slumped lower yesterday and the bulls lost their four day winning streak. Volume was low in the decline, as it has been for most of the week.

Financials were the big losers yesterday; bank stocks, including Bank of America (NYSE:BAC) JPMorgan Chase (NYSE:JPM), Wells Fargo (NYSE:WFC), Citigroup (NYSE:C), Morgan Stanley (NYSE:MS) and Goldman Sachs (NYSE:GS) were all down more than 3%.

In the most recent edition of the Sunday New York Times, Brian Stelter wrote an article about how "...increased market volatility is helping the ratings of business TV channel CNBC".

Why should you care? Because the frequency of this search term provides us with perspective into the movement in today's stock market. Armed with this perspective, we are better positioned to understand what actions, if any, we should take.

Last week's S&P 500 chart is unusual. After Monday's massive 80-point drop, the S&P 500 bounced in a huge range between 1,120 and 1,180. Volume was very heavy.


As we discussed over the last few days, the extreme volatility has been the result of a virtual perfect storm of uncertainty. The S&P downgrade, the last minute debt deal in Congress, the potential for recession and an escalation of debt issues in Europe.

The above chart also shows the S&P 500 was above 1,340 just a few weeks ago. At last week's lows, the S&P 500 was off around 17%. That's a sharp decline, no doubt.

The market weakened a little more on Tuesday, but the indices stabilized and kept the decline to a minimum. Volume levels were low as SPX consolidated at 1332 support. The industrials were hit the hardest and financials showed unusual strength. Large cap technology also continued to motor higher as stocks like HPQ, AAPL GOOG and MSFT rallied nearly 1%.

The TradeMaster portfolio was active again yesterday. On Monday a Chinese stock and RCMT were added to our long positions. Yesterday, F and another small cap stock were added, but F was a short.

Ford announced its second quarter results Monday before the market opened. Financial results were solid and EPS beat analyst expectations. And shares gapped 2% higher to begin the session. But high volume sales immediately dropped shares back to $13.15 from $13.44 intraday highs.

Congress and the Obama administration are at it again. Talks broke down over the weekend, which is a familiar development. The impasse is certainly weighing on the stock market.

Precious metals are rallying, bonds and stocks are down. Of these assets, it's the move in bonds that are most telling. Bond prices are falling, and yields are rising, because failure to pass a budget opens the door for a downgrade of U.S. debt from the ratings agencies. That, in turn, raises borrowing costs (interest rates) because repayment is suddenly less certain.

The market ripped higher yesterday after a consolidation session on Wednesday. Volume was jacked as the indices overcame short term resistance areas and pushed up towards fresh highs.

The market had a lot going in its favor yesterday. First, second quarter earnings have been good thus far, and the market is still riding on the bullish sentiment following AAPL, GOOG, IBM and the rest of the great technology earnings reports by big companies. Second, the EU finally got its act together and formed a bailout package.

The market severely and unexpectedly dipped yesterday. Especially in the Nasdaq, which was down nearly 2%.

Volume also raced higher as the indices transitioned from gains following positive employment, inflation and sales data; and then quickly turned negative by noon.

In addition to the great economic data JPM blew away analyst estimates. The positive news from JPM had most big banks up 1% to start the session, but by midday the financial index was down 1%.

Google (Nasdaq: GOOG) killed it last night. Earnings growth was an amazing 36% over last year. This morning, analysts are scrambling to get their new price targets for Google out.

The market rose modestly yesterday. Volume was average and the bulls were able to fend off the strong selling pressure from earlier in the weak. But the indices finished far off the session highs, which shows us the bears are out there.

The indices overseas were mostly lower today, although Europe got a slight pop after JPMorgan (NYSE: JPM) second quarter earnings were announced this morning. JPM stock was also up 3% following that news. The mega U.S. bank once again beat estimates and grew profits. JPMorgan reported $5.4 billion in income or $1.27 per share in the second quarter. That compares with earnings of $1.09 one year ago.

JP Morgan (NYSE:JPM) turned in a very solid second quarter earnings report this morning. Revenue was $2 billion better than expected, at $27.4 billion. And earnings were $0.06 better than expected, at $1.27 a share. This was the 11th consecutive quarter that JP Morgan has beaten.

You'd think analysts would be able to adjust their estimates to account for the consistent out-performance at JP Morgan. And truth be told, they probably are.

But there are so many little things the company can do to get its quarterly numbers that analysts have little chance of nailing it.

Yesterday was an interesting one for the stock market. There was plenty of negative news hitting the wire -- from the EU's continued inability to decide on a course of action, to the continued standstill of our own budget debate.

But investors glommed onto a suggestion from the minutes of the last FOMC meeting that QE3 could happen if the economy continues to struggle, and stocks rallied sharply right at 2 pm. The mini-rally reversed just as quickly as it began.

The stock market would clearly like more quantitative easing. But it would not be a good thing for the economy in the long run. It is time to let this economy slog through the housing problems and the unemployment problems without flooding the market with cash.

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.

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.

Yesterday, we talked about bubbles and tech stocks. While it's possible to argue that certain sub-sectors of the Nasdaq may have some bubble-like valuations, technology blue chips are definitely not in bubble territory.

As I noted, the Nasdaq 100 (NDX), which is comprised of the 100 largest companies on the Nasdaq, is currently trading with a trailing P/E of 12.5, according to the Wall Street Journal.

The pundits agree. It's a technology bubble. And all because social media stock LinkedIn (Nasdaq:LNKD) now trades with a P/E of 600 on a paltry $15 million in trailing earnings.

Internet heavyweight Google (Nasdaq:GOOG) is having another banner quarter. The company best known for its market leading search engine is expected to post nearly $35 per share in earnings for 2011.

But what many investors miss is that smart-phones driven by Google's Android operating system are giving the iPhone a run for its money. In fact, smart-phones using Android are now the market leader with 33 million units sold in the 4th quarter, compared to 16 million iPhones. Well over 100 million Android based phones will be sold this year.

The market rallied, rather unconvincingly, after JPMorgan (NYSE: JPM) blew away analyst estimates. As noted in the morning alert on Wednesday, JPM reported 70% EPS growth, but noted a decline to

So, a headline on Yahoo! Finance today read “Nokia, Microsoft in pact to rival Apple, Google.” Apparently, Nokia (NYSE:NOK) and Microsoft (Nasdaq:MSFT) are feeling the heat for missing the smartphone boom and so they are going to team up to go after the leaders in the space.

Now, to me, this is the equivalent of the Carolina Panther teaming up with the Cincinnati Bengals in order to compete with the Green Bay Packers. It’s just not going to work. Two companies that have completely failed to have any semblance of market awareness simply aren’t going to suddenly morph into a cutting edge technology giant.

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.   

Yesterday, investors have spoke loud and clear. And they said “If it comes down to Goldman Sachs (NYSE:GS) vs, SEC, I’m betting on Goldman.”   

 

And why not? Goldman is all-powerful. It’s #2 on my “never short” list, after Apple and before Google.   

 

Goldman has proved its ability to stay ahead of the curve. It survived numerous lawsuits and a $110 million settlement with the New York Attorney General for IPO fraud during the Internet bubble.  

 

Most recently, the accusations that inflated price projections and a huge oil trading desk at Goldman were behind crude oil’s run to all-time highs didn’t have any effect on the company. 

Why should this little matter with the SEC over taking advantage of the housing bubble be any different? 

The financial media is jumping to the conclusion that recent weakness for stock prices is related to the ongoing Greek bailout saga. But considering that Greece would prefer to have the IMF involved in its bailout plans because emergency loans would be cheaper, I’d suggest we need to look elsewhere for the real cause of the recent mini-sell-off.  

 

The Indian rate hike is certainly a more likely candidate. Not because India’s economy is driving the global economy, but because this move is another sign that central banks around the world are ending their stimulus policies.   

 

India’s move comes a full month ahead of the next scheduled central bank meeting. The timing suggests that perhaps inflation is becoming problematic. And it also raises the possibility that India will hike rates again when it meets next month.   

 

Don’t underestimate the significance of Google’s (Nasdaq:GOOG) possible exit from the Chinese market. 

The AP is reporting that China has trimmed its holdings of U.S. Treasury’s by $5.8 billion in January. I’m sure members of the doom and gloom economic faction will point to this as solid evidence that the U.S. is losing its ability to fund spending and is inching ever closer to default.   

 

In my opinion, this line of thinking is completely unrealistic.   

 

China still holds $889 billion in T-bills. It’s clearly not “dumping” American debt. And as I discussed last week, there is evidence that China is moving to more direct investments in the U.S.  

 

China’s state-run investment company, the China Investment Corporation (CIC), is already involved in a buyout offer for shopping mall owner General Growth Properties (NYSE:GGP) through Brookfield Asset Management (NYSE:BAM). 

I suppose it’s fitting that futures should be down on the morning of the one-year anniversary of the stock market bottom last year. Perhaps stocks will put in a similar reversal today, but even if they don’t, I think we can take a little selling in stride.   

 

Oil prices are down a bit today as the dollar strengthens. We should note that the dollar and oil have moved higher in tandem lately, proving that there is more to the strength in oil prices than its relationship to the U.S. dollar.   

 

Expectations for the global economic recovery and a subsequent rise in demand for oil are part of it. But I also think that investors are slowly realizing that there is very little upside for production levels in non-OPEC countries.   

 

A recent article about Mexico bears this out...

Shares of IncrediMail Ltd. (Nasdaq: MAIL) are sinking to a 52-week low after the Internet content and media company said this morning that Google will terminate its AdSense partnership with IncrediMail.

As a result, Google is disabling ads to search result pages displayed through the company's account. Search revenues powered by Google’s AdSense program made a significant contribution to the company’s results in 2006 and 2007.

The company noted it is currently exploring alternative relationships with Google and other vendors.

Shares of IncrediMail (MAIL) tumbled 44.64%, or $2.04, to $2.53 out of the gate. Shares of IncrediMail have been trading in the range of $4.46 to $10.69 for the past 52 weeks.

What’s in a name? For web analytics company Visual Sciences Inc., it seems to count for a lot.

For the last year, the company known as WebSideStory, trading under the symbol WSSI, has been bouncing between $11 and $14 a share. In recent months, it’s been largely at the low side of the bounce, in part because earnings have been depressed by the cost of assimilating Visual Sciences LLC., a competitor it acquired in February 2006.

Then on May 10, WebSideStory disappeared. Along with its first-quarter earnings report, the company announced that the acquirer was taking on the name of the acquired. Now called Visual Sciences Inc. and trading under the symbol VSCN, it slightly beat analyst forecasts and announced upgrades of its two main products.

Investors embraced the changes—including the shift its new name implies—by bidding the stock back from $11 to just over $14 per share on unusually high volume in one day. Its market cap is about $290 million.

April 20 (SmallCapInvestor.com) – The major U.S. indices rallied today following news of stronger-than-expected financial results from giants such as Google Inc. (Nasdaq: GOOG).  Among small caps, shares of EpiCept Corporation (Nasdaq: EPCT) soared on news of an effective drug against brain cancer, while a rise in same-store sales lifted Factory Card & Party Outlet Corp. (Nasdaq: FCPO).

The Russell 2000 snapped a three-day losing streak, rising 9.54 points, or 1.16 percent, to 828.86, after setting a record high of 831.44 on Monday.  The Dow Jones Industrial Average added 153.35 points, or 1.20 percent, to 12,961.98, its third consecutive record close.  The Dow has increased 4.7% so far in April.

April 20 (SmallCapInvestor.com) – Wall Street is rallying following news of better-than-expected financial results by Google Inc. and other heavyweights.  Among small caps, Bell Microproducts Inc. (Nasdaq: BELM) has reported record first-quarter revenue, while Strattec Security Corporation (Nasdaq: STRT) received an analyst upgrade.

At 11:18 AM the Russell 2000 was up 7.66 points, or 0.93 percent, to 826.98, after losing ground for three days in a row.  The Dow Jones Industrial Average had added 106.95 points, or 0.83 percent, to 12,915.58.

April 20 (SmallCapInvestor.com) – U.S. stocks are posting strong gains in response to better-than-expected financial results by Google Inc. and news of strong earnings elsewhere.  In small cap action, shares of Bridgewater, N.J.-based Enzon Pharmaceuticals, Inc. (Nasdaq: ENZN) are rising on news the U.S. Food and Drug Administration has granted full approval for its lymphomatous meningitis drug DepoCyt.

Google’s (Nasdaq: GOOG) announcement Friday of its plans to buy privately held DoubleClick for $3.1 billion has led to increased interest in a couple of small-cap companies in the online advertising space.

Shares of digital marketing company 24/7 Real Media Inc. (Nasdaq: TFSM) and Marchex Inc.(Nasdaq: MCHX) were up on Monday on the heels of the announcement as industry observers speculated who might be the next takeover target.