Wednesday Outlook: The Bad News Is the Good News

Do not pay any attention to bad news. That’s the message from Tuesday's action. Bulls ignored record oil prices and crummy news [a dividend cut and wider loss] from Fannie Mae (FNM). Instead they chose to believe that FNM’s position going forward was strong and they would “feast on” market chaos from new products and, of course, the worst conditions were behind them.

I don’t know if senior management at any of these companies has any credibility left, especially the rating agencies. The latter are part of the game being played and we’re just shills.

But, let’s give credit to the tape action and that Cisco (CSCO) and Disney (DIS) beat estimates after the close. The major take here is how, if the economy is in recession, can Disney of all companies be doing well? It seems an earlier on the calendar Easter holiday period and foreign visitors helped as parks were crowded despite gas prices and other difficulties facing consumers.

In fact, earnings warnings have been modest if we’re falling into, or already in, a recession.

The volume and breadth are still unimpressive overall but better than expected earnings news from last night could possibly carry over to tomorrow.






















































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Comments

[Ker:]

Love it!
Would the top to be with tomorrows ECB interest rate decision ?

2008 May 07 08:59 AM

[hook:]

the only thing all these etf charts have in common is the lack of volume on the upmove. care to explain how that's bullish?

2008 May 07 09:11 AM

[RKC51246:]

hook - David is sarcastic most of the time - havent seen anything positive (except the negative) for quite some time

2008 May 07 09:17 AM

[Rich L:]

Ker That's what I'm thinking. Nobody has it on their radar. If they stand pat or even raise rates, dollar will tank, market will tank and bonds will tank. Our FED is in a box and europe might make them defend the dollar. They're tired of dealing with our worldwide inflation campaign.

2008 May 07 11:36 AM

[Nate C:]

As always, thanks David for the charts. I find them really useful. I also appreciate your remarks.

ps. I am so sick of these dollar bulls saying that the dollar has finally bottomed. Everytime the dollar ticks down I have to hear that we have finally hit a bottom and it is all up from here. LOL! Next stop for euro/dollar 1.65. You have to hadn it to Trichet about holding the line on interest rates and trying to stop inflation.

2008 May 07 11:41 AM

[adan:]

throw into the mix that retail sales in europe were reported this morning to have dropped to 1995 levels, and it starts to get interesting for all the de-coupling foreign-earnings bulls

re Fannie Mae (FNM), i think this is enough nonsense; if they are gonna have public monies to use and as backstop, they need to be reigned in re risk, period

2008 May 07 12:02 PM

[whidbey:]

David is overly bearish. Of course things are not looking good, but one must see the potentials in the US market. Personally I am just buying C$ and metals because, will, I am a little fearful the government (read Congress) robbing us again (10 to the 5th time). This can only happen when a corrupt government panders to an even more corrupt electorate. As the bard said, "We met the energy and he is us."

2008 May 07 01:19 PM

[karchad:]

I've been in DVY since 11/2003, and have an annualized yield still of just over 10%. Like any other investment, if you buy at the top, you suffer. If you buy decently, you can weather the bad times (and in fact buy more at low points). So his comment on DVY is a bit off.

2008 May 07 01:35 PM

[David Fry:]

karchad, let's see...........3 year "total return" on DVY 2.2% and 1 year at [15.92%].......how'd you do 10% a year? I'm all ears!

2008 May 07 04:09 PM