A Glimmer of Hope?

Yesterday we had a fairly decent snap back rally in stocks. It came out that apparently bank CEO's and executives were buying their own common stock. This is bullish in that it is likely the CEO's would not buy 11 million dollars(in one case) of common stock if it was going to get wiped out and go to zero. I would assume they know something we don't, however it hasn't been the case so far as they have apparently been oblivious to all the write downs as well. Regardless, this is a fairly positive sign and was taken as a positive by the market.

In addition to insider buying, we had Apple release it's earnings and blow them away. They blew away earnings in arguably the hardest quarter ever to sell high priced products. This shows that people are still buying high end electronics if the quality is good and that the consumer is not totally dead. I would like to be long Apple on a pullback for the longer term portfolio, the only question mark now is Steve Jobs which really shouldn't impact the stock but does so I have to be cautious. I will start to look at the financial statements and do some analysis on cash flows and make a determination.

We have a couple more important earnings releases in MSFT and GOOG. MSFT disappointed and announced job layoffs. GOOG reports after the bell. My guess on Google is that they beat expectations simply because if people are staying at home more due to the economy, they are likely on their computers more giving them more revenue in ads and search. Just my hunch, they are hard to gauge without statistics.

We also had jobless claims and housing come out today both worse than expected. I would argue that new housing permits going down is a positive since we need to get rid of excess supply to have a chance of housing prices stabilizing and improving. Jobless claims higher than expected is definitely not a good thing and will be one of the key metrics moving forward. However, we have to look at the market reaction after another initial sell off the market has recovered a lot of the losses as of this writing. The more bad news that comes out and gets discounted and the more we hold the better is the case for a bullish bias. We are currently in deeply oversold levels so I would think a rally is coming at least back up to the 860 level in the S&P 500 would be my guess. If we get good news out of the Obama camp and some positives in earnings this could be the catalyst.

I currently have no positions, I only have a 1% gain overall for this month however that is compared to a nearly 8.5% decline in the S&P 500 so I am still having decent outperformance relative to the major averages as of late. My only position is long the Euro which is somewhat a long stock play. If stocks do rebound we will likely see the Euro move up, oil move up, dollar move down. Treasury yields have also made a higher low and exceeded their prior high which I would think is also bullish for stocks as people get out of the safety of treasuries. TBT could be one way to play this trend.

In general, we can't have a sustained rally without financials participating. The banks that have held up better and made smart aquisitions will likely be the leaders coming out of this. U.S. Bank still has positive earnings to report, although the street didn't like the results they have avoided the massive write downs of others and will likely be a great company to own going forward. Wells Fargo and JP Morgan also made some smart moves and could be good plays.

So far 800 has held on the S&P in the face of nasty news, combined with the oversold level in stocks it supports a short term rally however I don't want to get too aggressive, patience has been working very well as of late so I am going to wait for confirmation before making any moves. At some point the market has to start discounting a recovery but I don't think we are quite there yet, possibly around March I think we could see signs of improvement, but again I'll wait and see.