ok heres a read take on pres spech tonight What Happens to Stocks After Tonight's State of the Union?
February 12, 2013 1:12pm PST
Dear SmallCap Network Members,
Another ho-hum day for stocks. It's not surprising. Like we said yesterday, the bulls and the bears are in the middle of a staring contest right now, and both sides are just waiting for the other to blink. It's going to happen eventually, but it's not necessarily the kind of duel worth watching. It's a little like watching paint dry. There's going to be an end to the face-off sometime though, and we still want to be ready for it when it gets here
Maybe part of the reason stocks are stagnating is a lack of news. The only biggies on the earnings front today came from Goodyear (GT) and Coca-Cola (KO) - which we'll dissect below - so in the absence of any actual news, the media made up some big news.
Today's batch of trumped-up puffery was compliments of perma-bear Marc Faber. More on that in a second. First, let's slice and dice this market, starting with a look at the Dow's current quirk.
Right on Cue If you don't think traders collectively bring pre-conceived notions to the table about where stocks should be trading, take a look at the nearby chart of the Dow Jones Industrial Average. That dashed line is the 14,000 mark. The index has been testing it since February 1st. We've seen a few intraday blips above that mark, but nothing impressive, and certainly no closes above 14,000 until today (and today's half-hearted, low volume effort isn't exactly a game-changer).
Were it not so consistent and so precise, it might not even be worth bringing up. But, with several decades' worth of combined brainpower and experience working here at the SmallCap Network, we can tell you there's nothing about the market that just happens by accident. Investors and traders ARE dialed into the fact that the Dow Jones index is at a major mental hurdle - a big round number - right now, and it's either going to be the catalyst for the next bullish leg, or the spot where all these recent buyers decide enough is enough and start to take profits.
The point is, while everyone is being lulled to sleep by what they're calling a "go nowhere" market, we're telling you this is exactly the time to be on your toes. These dead periods just don't last all that long.
Anyway, weighing in on the Dow today is Coke, falling by about 3% after posting not-so-great Q4 numbers. Oh, sales were up 4% overall, and profits were up 12.5%, but that still wasn't good enough to satisfy investors or analysts. Revenue of $11.47 billion was about 4.5% shy of the expected $12.01 billion. Per-share earnings of $0.45 were a tad better than the expected $0.44. Yet, there it is - a pullback. Consider it another piece of evidence that perception and relativity is more important than reality.
Goodyear also topped estimates, but again, the market rewarded the pleasant surprise with some stern selling; GT shares were off by about a full percentage point for most of the day. At least with Goodyear the market can justify the selling by saying revenue fell (year over year) 12%.
Like Coca-Cola, what spooked investors most about GT was weakness in Europe, and how that may continue to be a drag for the foreseeable future. Nothing new there.
As for the Dow and the rest of the market, traders are most likely waiting to see what President Obama says in tonight's State of the Union address; what better place to park stocks than right around a crucial XX,000 anyway? Will the President actually say anything that should move stocks? Doubtful, but that doesn't mean investors won't respond as if he had. Heck, traders may get several days' worth of traction from any semi-related comments the President makes. That's how it usually is. The scary part about that right now is simply that it seems like the media is looking for a reason - any reason - to start taking some profits and drive this market lower.
Case in point: Yahoo! Finance put Marc Faber front-and-center today when he compared what's going on with stocks right now to what was going on with stocks in 1987... right before the market plunged 40%.
As it turns out, the perma-bear and publisher of the 'Gloom, Boom & Room Report' [the title tells you everything you need to know about the guy] hedged himself and covered all his bases with plenty of ifs and buts and maybes, effectively saying nothing of any real substance. But, the fact that THE biggest financial portal in the world trotted the pundit out to sell a bearish headline just a day after Yahoo! Finance did the same with John Bogle is a subtle cue that the rhetoric is turning bearish because the bullish rhetoric is getting old. Sooner or later, the market will listen... and respond.
Until then, our bias is actually a little bullish simply because that's where the momentum lies, and because so many folks are just saying there can't be more upside ahead. Yeah, that can change at a moment's notice, but until then...
Bottom line? Tonight's pep talk could be a much-needed catalyst. Ride that trend if it materializes, bearing in mind that one wrong turn with the States of the Union could also be the one thing the financial media obsesses about; we already know the media machine is trying to talk stocks down again. That's what makes right now such a dangerous time - the tug of war between momentum and the media.
We'll give you some thoughts on that tomorrow after what is hopefully something market-moving (and we don't even really care which way).
Navigating the market can be daunting, as you certainly know by now. It's also the kind of thing you don't want to do unarmed and without assistance. As much help as the advice above may have provided, if you want the really good stuff then you need to check out the SmallCap Network Elite Opportunity. It gives you the proverbial 'rest of the story', with an even deeper analysis of the bigger market as well as individual stock ideas.
Simply put, you have to check out the SmallCap Network Elite Opportunity.
Wednesday's Earnings We're within site of the finish line for fourth quarter's earning season, and the number of high-impact announcements is winding down; we only had two today (GT and KO). There are still a few in the pipeline worth noting though, so we'll point them out when we can.
For tomorrow - Wednesday - we're most interested in Avis Budget (CAR), Cisco (CSCO), Dr. Pepper Snapple (DPS), Hyatt (H), Lorillard (LO), Vonage (VG), Wellcare Health (WCG), and Zillow (Z).
Real estate valuation site Zillow won't turn a profit, but the buzz is that the budding company is set to post a huge increase in revenue, and at least break even. The game-changer was and is mobile apps and mobile advertising.
Avis Budget is expected to turn in a loss again, though at least a smaller one. The pros say the car rental company will probably lose $0.08 per share for Q4 versus a loss of $0.14 for the same quarter a year earlier. Still, Avis Budget has been growing the top line like crazy, and should still post a profit of $2.41 per share for the full year.
Best of the Best The SCN contributors continue to lay it all out there, and today, John Udovich leads the charge with his dissection of the New York Times article that panned Tesla (TSLA) this morning. Udovich writes "To make a long story short, the east coast's frosty weather meant that Broder [the journalist taking the test drive] ended up with a Tesla brick that had to be dragged onto the back of a flatbed truck. He concluded that battery range in cold weather is less than what Tesla Motors claims it to be." As they say, them's fightin' words. John pens Tesla's counterpoints, and then points out a small cap idea that actually circumvents the very problem Broder had with Tesla's vehicle.
James Brumley also makes a key point about the war being waged between anybody who makes a smartphone. While the likes of Google (GOOG), Apple (AAPL), Samsung, and Microsoft (MSFT) are fighting one another on the smartphone front as well as the tablet front, there's another company off the radar that's feeding all of those companies in their war against one anther... a brilliant place to set up shop. As Brumley puts it, "Nobody wins a war except the arms-makers."Worth a look.
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