David Fry's Market Outlook for Wednesday

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Includes: IEF, MDY, TKF, XHB, XLF
by: David Fry

D Fry Market Outlook 18 07 2007

All eyes are on DJIA 14,000 while, at the same time, ignoring poor market breadth.

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Earnings are starting to come in, and one highlight was Merrill Lynch. Nearly one-third of its revenues are now sourced from "trading" [$3.55 billion] -- its largest single source of revenues. How much of that is from program trading I wonder? Do you care? Should you? Let's put it this way: the table below is something the Fed's primary dealers like Merrill Lynch & Co. Inc. (MER) would prefer not discussing. But others care, and this dated article reinforces what we've noted. These firms aren't your father's brokerage firms.

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These comments aside, earnings news is just beginning in force. This will continue this week and next. So far the news has been good, but stock prices have not reacted that positively. MER beat estimates but closed lower on the session. Later, both Yahoo! Inc. (NASDAQ:YHOO) and Intel Corp. (NASDAQ:INTC) beat estimates overall (I think), and are much lower in after-hours [a/k/a amateur hours] trading. So, it's been "sell the news" thus far.

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"Blinded by the Light" might have been a better theme, since the financial media is obsessed with DJ 14,000. At the same time however, most market sectors are struggling thus far this week. And good earnings have been met with early enthusiasm and late selling.

Bernanke begins his testimony Wednesday, and Barney Frank is wondering why the Fed should worry about inflation. [How brilliant a chairman is he?] Not to worry Barney, they don't worry about inflation either since they have the "core rate" to keep them warm.

We have more earnings news, the CPI and energy inventories to keep folks on edge.

This could be a very interesting week but then, aren't they all?

Disclaimer: Among other positions the ETF Digest maintains long or short positions in: S&P 500 Index (NYSEARCA:SPY), MidCap SPDRs ETF (NYSEARCA:MDY), iShares Russell 2000 Index ETF (NYSEARCA:IWM), iShares Goldman Sachs Technology Index Fund (NYSEARCA:IGM), NASDAQ 100 Trust Shares ETF (QQQQ), United States Oil Fund ETF (NYSEARCA:USO), PowerShares DB Energy Fund (NYSEARCA:DBE), PowerShares DB US Dollar Index Bearish (NYSEARCA:UDN), iShares MSCI EAFE Index Fund ETF (NYSEARCA:EFA), iShares MSCI Emerging Markets ETF (NYSEARCA:EEM), iShares MSCI Brazil Index ETF (NYSEARCA:EWZ), Market Vector Russia ETF Trust (NYSEARCA:RSX), iPath MSCI India ETN (NYSEARCA:INP) iShares Trust FTSE-Xinhua China 25 Index Fund (NYSEARCA:FXI) iShares MSCI South Korea Index Fund ETF (NYSEARCA:EWY), iShares MSCI United Kingdom (NYSEARCA:EWU), iShares MSCI Australia Index Fund (NYSEARCA:EWA), iShares MSCI Japan Index ETF (NYSEARCA:EWJ) and Turkish Investment Fund Inc. (NYSE:TKF).