Market Outlook - Aug 5th

It looks as if the rally continues; however, the next few days will be vital in terms if we pullback or extend with another “leg” higher. Two key events will be happening:

1. CSCO earnings Wednesday after the bell
2. Jobless claims on Friday at 8:30a

The market could pullback 4-5% in one day on a bad number or it could tripper a swing of new cash that could take us quickly to 1,050.

Looking at yesterday’s market action, REITs and Banks were the top gains because these are the only sectors, where multiples are truly not expanded beyond belief. If you are still short the SKF, just use trailing stops. I have many complex trades I do, like collars, put spreads, etc. but I really don’t want to post because they’re high risk and not all win, so I don’t want hurt anyone, in case some people don’t read the bottom disclaimer below and follow me into trades…then again I know no one does that.

The big boy, EXM, reports after the bell. I loaded with a 1,000 shares, so it will be interesting to see results with 16% short interest. It normally shoots 6%+ either way, during the times I have traded this one before; however, will ride the motorcycle through the rings of fire.
As for my views on the market, I am not really surprised at all with the huge ramp. It is really funny though, to see people 3 weeks ago, when the market was at 870 (while we went all in long) say we were going to 700, now those same people say we are going to 1,200 on the S&P. This is a prime example of why mutual funds don’t make investors money – it’s all psychology – the market is there to serve you, not to guide you. If you remember that quote until you die, you will be rich, I would be large amounts of money on it. I mean we do have some good earnings reports but all the beats are on the profit front, not the revenue front, so in my eyes they are not that great but rather these were expected.
As for the cash for clunkers programs, I personally like it as a Ford shareholder but in reality I think it’s a very dangerous bet and makes a double-dip recession more probable. “Well RF, how is that possible?” It’s very simple. I do think this $3B was spent more wisely than the AIG or other BS our gov’t has spent BUT the many problem is that it is temporary. I just reviewed the data, so lets review:

1. The top 5 cars being purchased are: Ford Fusion, Honda Civic, Toyota Camry, Prius, and Corolla. What seems weird about that? Well let’s think. 80% of the money being spent here is going to another country’s pocket! How dumb is that? We are paying for people to get new cars, who may not even be able to afford them, and the most of the money is going to countries that own are debt! Brilliant.

2. Secondly, the problem is that it is pushing orders up. People who were thinking about buying cars in 2010 are now buying them now in 2009, which is making the 2009 numbers seems great; however, these orders are being pushed up; which leaves 2010 auto sales to be worse and more chances of sales misses, production cuts, layoffs, etc.

Again, I think it is a risky and find of dumb bet; however, I will say this, I like it more than the AIG and other bailout crap they done…and to be honest, the program seems to be working! I just rather see them give everyone at $690 gift card (it cost the same) and let them go spend it wherever they want. I think that would be more useful.

Enough of that, I will be looking at names in commodities sector, as well as names tied to housing, particular industrials. If I find what I want, at the right price, I will post the buys. Good day!