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.

After Warren Buffett made his IBM (Nasdaq: IBM) purchase public this week, technology stocks have seen strong gains, with the big cap American technology stocks leading the charge.

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.

There is a budding divergence between economic data and corporate forecasts. We’ve seen a stark deterioration of economic data across the board. Manufacturing surveys have weakened, auto sales were down in May and then, of course, we got the icing on the cake with the pitiful employment numbers last week.

Economists and strategists have been falling all over each other as they lower their 2011 GDP estimates. (Of course, Daily Profit readers had a heads up, as we noted the change in the Fed’s outlook after the last FOMC meeting.)

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.

It was somewhat lost in the shuffle in Wednesday. Investors were so stunned at Fed Chief Ben Bernanke's admission that commodity inflation might accelerate over the next few months before the Fed is forced to act on interest rates, they missed the part where the Fed lowered its 2011 GDP growth estimates from a range between 3.4% -- 3.9% to 3.1%.

For anyone pinning his or her hopes on 3.9%, that's got to be disappointing.

But after yesterday's first read of Q1 2011 GDP growth -- a measly 1.8% -- investors are likely to take another look at the total message delivered by the Fed.

The Fed was deliberately attempting to prop up the stock market with QE2, driving money out of bonds and into stocks. That's the "risk on" trade, appropriate for when the Fed is backstopping assets.

Corporate America kicked it up a notch last week. And the S&P 500 appears to be taking out resistance at 1,335.

Bloomberg reports that 71% of the 188 MSCI World Index companies that have reported Q1 earnings have beaten earnings. Earnings from this group of companies are beating expectations by 8.8%. And I’m sure when similar data is available for the S&P 500, we’ll see similar statistics.

Only 20 companies from the S&P 500 have reported earnings so far. 15 of them beaten expectations by 0.7%. The pace of reporting for S&P 500 companies picks up today.

Goldman Sachs (NYSE:GS) beat expectations this morning. After the bell today, we’ll hear from IBM (NYSE:IBM) and Intel (Nasdaq:INTC). Then, tomorrow, we get results from Apple (Nasdaq:AAPL).

I am very curious to see how investors will react to the possibility that QE2 may be ending. The policy is set to conclude in June, anyway. And I would suspect that the Fed will continue until then, regardless of growth.

Intel has clearly been left behind in the handheld/potable wireless device boom. PC chips are pretty much commoditized at this point. The growth is in chips for phones and tablets. Companies like Qualcomm (Nasdaq:QCOM) and Nvidia (Nasdaq:NVDA) are leading.

I have no doubt that Intel will make an acquisition to get more exposure to the wireless device space, but hiring a pop star to help drive new products is a clear indication that Intel is feeling the heat.

The correction we’ve been monitoring certainly picked up some steam on Friday. The rioting in Egypt gave investors an easy excuse to drive stocks sharply lower. And there should be no surprise that tech stocks and the Nasdaq bore the brunt of the selling.

Tech stocks were strong momentum trades in the last couple of months of 2010 and the first weeks of 2011. Then earnings seasons started. I can’t say that earnings expectations were too high – many of the top tech stocks, like Apple (Nasdaq:AAPL), IBM (NYSE:IBM), Intel (Nasdaq:INTC) and Qualcomm (Nasdaq:QCOM) beat expectations and offered solid guidance going forward.

So far this earnings season, we are seeing a clear separation between two of the stock markets leading sectors Starting with Intel (Nasdaq:INTC) and continuing with Apple (Nasdaq:AAPL) and IBM (NYSE:IBM), technology earnings were fantastic in the fourth quarter.

But it should be clear that banks are still grappling with the loss of mortgage business and the fallout from the financial crisis. And quite simply, while the climate for banks has certainly improved, as a group, they are not going to return to the growth they enjoyed in the last decade anytime soon.

Yesterday, both the U.S. dollar and stock prices moved lower. That’s pretty unusual. Also yesterday, Intel (Nasdaq:INTC) posted an absolutely blowout quarter. This morning, in pre-market, the stock is up just a nickel.

Now, Intel has sold off on positive earnings reports over the last few quarters. But this time, Intel beat all expectations. Earnings were up 48% over last year. And yet the stock appears unable to move higher. I will call that unusual, as well.

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? 

Transmeta Corp. (Nasdaq: TMTA) said today it reached an agreement with Intel to settle all claims between the two companies and license Transmeta’s patent portfolio to Intel for use in current and future Intel products.

The settlement dismisses pending patent litigation between Transmeta and Intel for a mutual general release of all claims of any type between the two. The developer and licenser of computing, microprocessor and semiconductor technologies sued Intel alleging that Intel infringed on Transmeta's patents by making and selling a variety of microprocessor products, including Intel's Pentium III, Pentium 4, Pentium M, Core and Core 2 product lines.

The two companies also struck a deal that gives Intel a perpetual non-exclusive license to all Transmeta patents and patent applications. The license includes any patent rights later acquired by Transmeta, or that may be filed during the next 10 years.

Transmeta will also transfer technology and grant Intel a non-exclusive license to its LongRun and LongRun2 technologies as well as future improvements.

Additionally, under the agreement, Intel has agreed not to sue Transmeta for the development and licensing to third parties of Transmeta’s LongRun and LongRun2 technologies.

Intel will make an initial $150 million payment to Transmeta, as well as pay Transmeta an annual license fee of $20 million for each year of the next five years.

Shares of Transmeta (TMTA) rocketed 219.62%, or $9.18, to $13.36 at 10:56 a.m. ET. Shares of Transmeta have been trading in the range of $4.10 to $26 for the past 52 weeks.