Wall Street Strategies'  Instablog

the trigger because of my market comments. I was floored because I've been damn near begging people to pull the trigger throughout this entire rally. Of course, there are danger signs and I feel like it's my job to bring them up and highlight them. At some point the greatest fears of many Americans will be challenges that smack us right in the face. I don't think that's happening right now. The wheels are in motion for sure, from wild government intervention with rules and regulations, which aren't intended for anything, other than to crush Wall Street rather than help Main Street, to the reckless spending. It takes a long time for this stuff to bring an economy the size of America to its knees. I even believe they can be cut off at the pass if there is political will. But, until these issues blossom I've been goading, prodding, and needling investors to take advantage of this window of opportunity. I'm worried about the tsunami coming down the road and I know it's more of a threat than global warming or evil corporations.

But you should try to take advantage of what could be the last great rally that will be bookmarked with periodic slides that will shake many out and send them back into their bunkers. Literally.

Putting aside the obvious threats to our economy, and putting on the kind of blinders that major-decision makers use, this market could find itself a larger cheering section. One school of thought is on the verge of giving this rally a stamp of approval. The "Dow Theory" is compromised of six tenets including the key tenet that averages must confirm each other, particularly transportation and the industrial average. Of course, back then, transportation was hot as the rails were rocking and uniting the nation and opening imaginations beyond mental and physical barriers much like technology does today. Rails carried goods and made for the perfect proxy for the economy. Most people don't realize but the Dow Jones Transportation Index, created on July 3, 1884, is older than the industrial index. Back then it was comprised of 11 companies, nine rails and two non-rails (Western Union and Pacific Mail Steamship Company). These days it's 20 stocks of which only five are rails and seven are involved in the trucking industry. In addition, UPS (UPS) and FedEx (FDX) and only one dry bulk shipper are in the fold.

Because of the way the current transportation bill is comprised many think using the dry bulk shipping index is smarter, it's a better proxy for the goods moving and it has a better reflection of the global economy. The Dry Bulk Index is on fire, a fact underscored yesterday by results from Genco Shipping (GNK), which posted earnings results and rocketed 15.0%. On that note, the DJTA is trading well above key moving averages and is nearing a true breakout after upbeat comments from UPS and FedEx. The only member of the index that traded lower is YRCW, which is facing serious funding issues but may snatch victory from the jaws of defeat.

Initial Jobless Claims

Jobless claims fell to 502,000 from 514,000 the previous week, beating the consensus estimate of 512,000. Glancing at the jobless claims chart, you can see it's in a clear downtrend. However, we still haven't broken below the 500,000 mark since the first week of January. I remember back when we first broke above 500,000 and everyone thought the world was ending, so even though we are trending down we are still in emergency territory. There were some whispers that today's result would come in below 500,000 so even though it was below consensus there may still be a hint of disappointment.

Color on Wal-Mart Earnings

Brian Sozzi

As to be expected, the Wal-Mart operating machine was in full swing in the October quarter. A continued focus on driving productivity throughout the organization, such as reducing the height of inventory in the stores to more efficiently operating the Wal-Mart private truck fleet (and other factors; we had the great privilege of attending the Costco analyst day in Manhattan yesterday evening; the company trimmed 7 centimeters off the top of its grape packaging for a total of $2.0 million in annual savings. A shift to squared bottles for Kirkland private label goods, for example, nuts, has maximized space on pellets that go into the transportation vessel. Retailers have truly rethought their operations) helped to expand gross margin nicely year over year despite the impact of consumables deflation, resumption of higher energy prices, and aggressive pricing maneuvers.

However, there were a few areas of concern throughout the report, which explains why the stock is getting hit pre-market. In many respects, these sources of worry should have been clearly understood as executives have been on the road throughout the quarter tempering expectations for the holiday season as a result of a "difficult" consumer spending backdrop. Nonetheless, here is what we are seeing in the numbers:

Why we think stock is getting hit on news:

• Guidance for 4Q in line, with aggressive pricing this year, more so than last our my opinion (see recent Blackberry promotion), there is concern as to whether they could meet this in line forecast
• Comps in 3Q at WMT U.S. division were below plan
  
• 4Q WMT U.S. comp guidance assumes a 240 bps y/y decline
  
• Operating margins at WMT U.S. down 31 bps q/q
  

Positives (must point these out as well for those optimists)

• Gross margin up nicely y/y, beat consensus forecast
• Sam's Club showing real progress in gross margin and expense reduction