Monday Feelings-16 Oct

Earnings – The first big week of quarterly earnings reports started a bit shaky, with a disappointing report from Alcoa (AA), however,it got much better quickly as several companies in various sectors, including Costco (COST) and Pepico (PEP) reported earnings above expectations. Add to this a report from McDonald’s (MCD) that their third quarter earnings will come in above expectations, and the market made a big jump toward the end of the week. The reports so far also suggest that consumer-based companies will do well overall. The market tends to be very sensitive to what the consumer is doing, so a big quarter for those stocks will likely help bullish trends to continue. Next week will bring us a lot of the financial and technology reports. If the positive earnings also include those sectors, we could continue to rally. If these sectors have some major disappointments, we could trend back a bit. A bullish factor right now.

Economic Reports – There were only a few economic reports last week, but they supported the bullish case. New claims for unemployment were down from previous weeks and the U.S. budget deficit continued to drop. The September Retail Sales report was down, but that was actually good news, since the drop was mostly because of a drop in gasoline prices. This is also a bullish factor right now.

Energy prices – The price of crude oil continues to decline, which can be nothing else but bullish. Crude oil closed the week around $58.50, and the chart trend suggests that it will continue to move downward. This is also a bullish factor.

Interest Rates – Really a non-factor right now. The market does not expect the Federal Reserve to change interest rates one way or another for a while. Stability in this area is a plus for the bulls in the market.

Bottom Line – All the factors seem to continue to line up to the bulls in the market.