Earnings Day-Part 2

by Larry Levin

Yesterday I mentioned the big name earnings announcements, which were pretty awful, but I also mentioned oil when I asked, Will oil exacerbate this drop tomorrow, or will the hurricane veer off course causing oil to fall? The answer is that the hurricane veered away from the oil platforms in the Gulf, which caused crude oil futures to fall again. This drop in oil was the salve that cured the rash of terrible earnings - prompting the Dow to close up 135-points.

Recapping the recent earning reports we see ----

1) Apple reported poor earnings and closed down just 2.57% today.

2) SanDisk wasn't helped by today's late rally. It closed down 24.04%.

3) Merck wasn't helped by the rally either as it closed down 11.32%.

4) Texas Instruments closed down 14.62%.

5) And American Express closed down 6.53%.

So all of these big name companies closed lower, yet all of the indices closed higher. What gives? Look at those names again. Can you tell which list those firms are not on? They are not part of the government's Protection Racket, and those that are on the list led the market higher (again) today.

1) WaMu (Washington Mutual) is the latest bank to report HORRIBLE earnings. Its massive losses were more than 300% WORSE than analyst's expected --- yet it is UP while I type this in the after market!

2) Yahoo's sales and profits were also bad. Analyst's expected 11-cents/share, but got 9-cents/share. This stock is also UP in the after market even though the company's performance was significantly worse than expected.

With the early terrible earnings reports from Wells Fargo and Bank of America to tonight's earnings we can see the market react in different ways. First, with the early bank reports, we were told they could have been worse - so they were bought. Then last night's terrible earnings led them being sold! Now we have tonight's earnings, which suck branch water, and their stocks are going up. My point is simple: fundamentals are useless.

Sometimes worse than expected earnings are bad, sometimes they are good, and sometimes they are ignored altogether. And good earnings can be treated the same way. Last quarter Coca-Cola knocked the cover off the ball with great earnings - yet the stock was crushed the next day. The reason went something like this: Well, it was a good number, but we were expecting an even better number. Oh really? Then why weren't these higher expectations published? It's so ridiculous I decided a long time ago that funnymentals are obviously worthless.

So what is useful? I say it every day: the trend. Although we at Secret's believe the markets are in a secular bear market (since the 2000 high), the market can and will rally, which has happened over the past few days. In fact, 95% of all of today's trades were BUYS even though we are long term bearish, because today's trend was clearly up. You may find it shocking that the S&P500 could rally considerably higher, say another 100 to 115-points, and still be bearish. Either way, I'm following the trend.

Real Time Trading Signals*for

Trade Date: 7/22/08

E-Mini S&P Trades*
(before fees and commissions):

1) VA sell @ 9:40am at 1258.00 = +1.00 & +3.00

2) Engf buy @ 12:20pm at 1260.00 = +1.50 (1 lot)

3) OTF buy @ 1:05pm at 1259.25 = -1.75 (1 lot)

4) Algorithm trades (5)...combined total...+3.75


E-Mini Russell Trades*
(before fees and commissions):

1) No ER trades filled today.


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