Trump vai enviar cartas a 12 países a notificar tarifas

[Ulisses Pereira]

Rev Shark
"How Great Are the Market's Expectations?"
1/14/04 08:26 AM ET

" "A large part of the popularity and persuasiveness of psychology comes from its being a sublimated spiritualism: a secular, ostensibly scientific way of affirming the primacy of 'spirit' over matter."

-- Susan Sontag

The stock market is always an exercise in psychology, but there are certain times when psychology plays an even greater role. Earnings season is one of those times. The reported numbers are meaningful only in the context of expectations. A "good" report when expectations are high will be treated as a disappointment by the market while a "bad" report when pessimism is high will be treated favorably.

What makes earnings season particularly tricky is that not only do we have to accurately predict the numbers that will be posted, but we also have to accurately understand the level of expectations. If we predict the numbers but fail to understand expectations, we can easily find ourselves on the wrong side of a trade.

As we wait for Yahoo! (YHOO:Nasdaq) and Intel (INTC:Nasdaq) to kick off the earnings parade tonight our key task is to understand the level of expectation that exists. The great likelihood is that both companies will post solid reports and beat the posted predictions. To make some money we need to understand how optimistic this market is and whether it is possible for the reports to be good enough to surpass expectations and entice new buying.

The first step in figuring the level of expectation is to look at recent price action. Obviously, if prices rise sharply prior to an earnings report then market participants must be expecting something pretty positive. That brings us to the dilemma that is this market at the moment.

Yahoo! and Intel as well as the major indices have been running straight up since mid-December. We have made a huge move in recent weeks. How much good news has been priced in by that strong action? How high are expectations now? Will a "good" report that beats the current estimates be good enough?

My feeling is that it is going to be extremely difficult for earnings report to live up to the expectations that have been built in recently. Much of the current strength is attributable to seasonal factors and these factors will begin to ebb exactly as earnings reports hit. We have a very high hurdle to jump if this market is going to continue its upward ascent.

One of the additional complexities right now is that there continue to be many individual charts that are set up very nicely. Unlike the indices, they are not extended and have solid bases from which to work higher. This has been the case for a while and has left me in the position of being aggressively long in a number of individual stocks but increasingly wary about the overall indices.

The bottom line is that we have a very tricky environment to navigate. There is some real danger because of the extended level of the indices but plenty of opportunity in individual stocks that have good momentum and are not as elevated.

In the early going we have a positive bias. Intel is trading higher as optimism grows about its earnings report. Overseas markets were generally positive and the dollar was strong overnight.

Good luck and go get 'em. "

(in www.realmoney.com)