Sunday, April 12, 2009

Psychology of the Upcoming Week's Economic and Earnings Data

Greetings to all who respect risk takers, smaller government, war veterans, and the eternal greatness of men like Thomas Jefferson and Ronald Reagan,
Here's the first sentence copied and pasted from our prior weekend piece: "The S&P 500 index climbed 26 points, or 3.1% for the week. A full 8 of those 26 points, or almost 1% came as a result of short covering in the last 23 minutes of Friday." Coincidentally, the last day of this past week, Thursday, exhibited the classic bear rally effect as well. Bear markets catch most off guard, as they work to eventually destroy more wealth than they create. POTC sure hopes no reader bought blindly on Thursday, especially the financials.
The past week saw the S&P down 26 points, from 842 close on Friday, April 3rd, to the 816 area on Tuesday and Wednesday. Then the last day of the shortened trading week, Thursday, witnessed a rally spurred by positive comments from Wells Fargo (WFC). Additionally the 20K drop in initial claims for unemployment was cheered, yet we warned last week of this false signal resulting from the smoothing effect of more government jobs. Although we mentioned in early March and late April, esp in the March 1st archived piece, that the pendulum was due to swing and we should rally above S&P 800+, we now urge traders to be very cautious in their stock and option selections.
Tuesday's after market earnings from Goldman Sachs (GS) will emphasize why being vigilant now is so important. It has to do with...
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