According to Bloomberg:
Profit has topped estimates at 79 percent of the 104 Standard & Poor’s 500 stock index companies posting results so far from the just-ended quarter, and if the trend holds it would be the most since at least 1993. The rate was a record 72 percent for all S&P 500 companies in the second quarter, Bloomberg data show.
Once again, wallstreet is behind the curve this time on the way up. In May I made note of a Bloomberg article that said the following:
Analysts overestimated earnings by an average 13 percentage points in each period between the third quarter of 2007 and the end of 2008. Better-than-expected first-quarter results haven’t prompted them to boost forecasts for the rest of 2009. Instead, they’ve ratcheted down predictions as the first global recession since World War II weakened demand.
Is it really a suprise after reading the above that companies are smashing their estimates? I don't think so.
Bears will have a really hard time taking this market down in a meaningful way (i.e. greater than 10%) when you have a low interest rate environment, rising earnings from depressed levels, a postive trend in beating earnings expecations and a large overhang of skeptical investors.
Today's action seemed a like a token "sell on the news" type sell off. Noticed how the markets immediatley went into the red this morning....that smells of normal profit taking. The collapsing VIX however should be a concern for any ST bulls...so be on gaurd. I think though there's a decent chance at another stab higher this week but this is just gut feel. I'm not taking part of any ST trading of the indicies as I have been repeating ad nauseum.
Today the Canadian dollar fell sharply on comments from the Bank of Canada (BOC)that a strong Canadian dollar (the loonie) would harm projected growth prospects for Canada which traders took as a signal that the BOC wants the loonie lower and hence may intervene in the markets. This is highly unlikely to happen...they didn't do it last time the lonie was above parity vs the US $ and so I doubt they will do it now with the loonie still below parity. Only if the Canadian dollar was well above parity for a sustained period of time would they even consider such a notion. There's nothing much the BOC can do to lower the dollar except cut rates which they will not do given that they have already stated their intention of raising rates sometime in the middle of next year (which I doubt will happen....it's likely to be sonner than that IMO). Second of all the Canadian bank rate is only .25% so there's not much to cut but that doesn't even matter because cutting rates is absoulely out of the question.
So if you ask me, the Canadian authorities are pretty much helpless in influencing the currency other than trying to talk it down.
Anytime you see authorities jaw bone a particular market lower (or higher) like this and you get a reaction from the market in that direction, it's been my experience that such reactions are knee-jerk in nature and don't last for long (1-3 days) and the market will bounce back right back to were it was in short order. These types of situations are one of the rare times when the market gives you a gift.
FXC is a currency ETF that tracks the Canadian dollar vs the US. Today's comments by the BOC derailed the loonie from it's course of achieving parity with the US dollar (100 on FXC) but as per the above paragraph I suspect this is only a temporary thing and so a good ST buying opporunity has presented itself. The only thing that I am leary about however is the potential for ST weakness in the equity markets which may very well put additional pressure on the lonnie as it is seen as a "risk seeking" currency. I will be watching to see how the loonie reacts to any weakness in equities.
I am eyeing December call options on FCX
No comments:
Post a Comment