InTheMoneyStocks Market Analysis

The Numbers Do Lie – Corporate America Trying To Pull The Wool Over Your Eyes

As earnings season is now in full swing, I cannot help but analyze the earnings results from countless companies. So far the markets have rallied 10% in just the last two weeks. Most earnings have blown through estimates. It has been a meteoric rise, the markets blasting up through the double top from mid June. Things seem to be rosy once more on Wall Street. Talk of a recovery, V-bottom and the next monster bull market are now spewing from the media.

Be afraid. Main Street is having a major disconnect from Wall Street. Along with Wall Street, our government, Federal Reserve and the media are too blame. The wool is been pulled over your eyes!

While the markets continue to soar, I sit back and shutter. Why you ask? Because for those of us that really analyze the numbers, it is a very scary thing to behold. For the common investor, they will simply look at the earnings per share and do their P/E calculations. This tells them whether or not a stock is cheap relative to the S&P historic multiples. If it were only that simple these days.... Accounting changes for financial firms have given them the ability to knock the earnings out of the park. Recently, JP Morgan Chase (JPM) and Goldman Sachs (GS) both blew away estimates. However, does anyone really wonder what the accounting changes actually did to these numbers? Why AIG was saved? Or look at the credit card defaults and risk these companies face going forward? Or better yet, does anyone note the new risks companies like Goldman Sachs are now undertaking in order to turn such big profits? I continue to shutter. The next disaster may be in the works.

While the financial companies are in a league of their own when it comes to earnings, I am here to discuss the earnings of other companies, non financial firms.

What has me so scared for the next two years? While most companies are blowing out earnings per share (EPS) numbers, they are missing on revenue. So how are they able to beat on earnings but then miss on revenue? Simple. Cutting costs. Now think about this. How are they cutting costs? Obviously, as the unemployment numbers tell us, they are cutting jobs. In addition, they are cutting out projects that were not profitable, buying less inventory, trimming the fat in other words. While this is a smart thing to do to make these companies more efficient, in an economy that has unemployment spinning out of control, it may not be the best scenario. Each person that is laid off spends less money. With less money spent by that one person, the trickle down effect is drastic. Imagine how each person with a job spends a certain amount, each place they spend, someone else must work and is paid. They spend, others need jobs and the cycle continues. So imagine the effect of just one layoff.

In addition, cutting costs can only go so far. Think of it as a company on steroids in the near term. Yes, they look very strong but wait until certain things start to shrivel or the steroid supply ceases. This is right around the corner, once cost cutting can go no further. Eventually, there is nothing left to cut. So while earnings are blowing away estimates, the real key is to watch the revenue numbers. Within a quarter or two, earnings will start to lag as revenue continues to decline and there are no more costs to cut.

In many ways it is a double edged sword. Near term, the earnings are blowing out expectations, but as a result of the cost cutting, unemployment is spiking higher. This will cause the recession to last much longer. As I have pointed out, cutting costs to boost earnings is not showing the true nature of a company.

To give proof of this you only have to look at the earnings over the past couple weeks. Pick out any handful of companies that reported earnings. Most have blasted through earnings yet revenue was in line or missed.

Let's start with EI DuPont de Nemours & Co. (Symbol: DD). Analysts had projected that they would make $.53 on $7.10 billion in revenue. The stock reported earnings excluding items of $0.61 which beat estimates. However, revenue came in light at $7.09 billion.

Next, let's take a look at Coca Cola (Symbol: KO). Analysts estimated they would make $1.00 per share while raking in $10.95 billion in revenue. The company reported earnings per share at $1.02, beating by $.02 but revenue missed, coming in at $10.59 billion.

Last, take a look at Chipotle Mexican Grill (Symbol: CMG). Analyst expected earnings of $.88 per share on revenue of $391.2 million. When the company reported, they blew the earnings out of the water at $1.10 per share. However, revenue again came in light at $388.8 million.

These are just a few of the many earnings beats but revenue misses. As of now the market has swept the revenue misses under the rug. A rally on hope and ignorance continues. It will only last so long. The average investor has no clue as the media is pumping the recovery and the great earnings results. The cost cutting can only last another quarter or two and it will level off. After that, earnings could see a massive plunge. Contrary to many, I see no recovery starting yet. As long as the unemployment rate climbs, people will hold back from spending, not buy houses and continue to struggle to pay their bills.

Unfortunately, earnings numbers do lie and the wool is being successfully pulled over the average investors eyes. They have bought in, hook, line and sinker, putting their hard earned money at what could be a major top.


By: Gareth Soloway
President & CFO
InTheMoneyStocks.com
 
When The Market Give You Lemons, MAKE MONEY!

This market has been plagued with interesting factors creating an even more difficult trading environment; buy programs, sell programs, mass manipulation. All this emphasizes the importance of becoming privy to the factors that move this market under any circumstance.

Today's end of day price performance displayed one of the many scenarios that time after time, catch the amateur trader on the wrong side of the market - fake out moves.

Confirmation is constituted with a close below the trend line, then the next candle needs to close below the low of the previous candle - creating a true breakdown. Without this secondary confirmation, the next or current candle can easily float back higher, (faking out the amateurs) thus decreasing the probability, as it did in today's example. This is the main reason why it is vital to understand the need for confirmation on patterns, trend lines, nearly any trade prior to entering. Most obvious or well known plays (whole numbers, trend lines, patterns) are designed to get the amateurs on-board thinking a move has been confirmed then turning against them.

Note the channel trend line below in the chart. The only way sell volume would have come into this market to negate the buy program would have been if that lower line was broken and confirmed. However, it was not broken only pierced, and a massive buy program hit again. This happened yesterday as well and probably 95 of the last 100 trading days. As the manipulation continues, you must refine and advance your trading skills. By learning the proper tools needed you will enable yourself to make endless amounts of money from the lemons the market provides!

Begin to enlighten yourself NOW!


Sign up for InTheMoneyStocks Webinar: Methodology Revealed NOW! (space is limited)


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The optimistic view in CNBC is always going to hide the truth.Especially that Kudlow " Republican" unofficial spokeperson.What is also pathetic is the way they under report or fail to report the American companies that open in Communist China under the cheap labor pretense.The Chinese keep cheating their way to progress by keeping their currency undervalued and subsidizing their export Industry and other International Trade Violations while the US Politicians and News Media keep silence or give poor lip service to these issues.How the Fed and Congress has allowed the Chinese to hold such a large percentage of US Treasuries is unacceptable. The Communist Chinese has the US by their balls.
 
Markets Drop Big Off Fridays InTheMoneyStocks.com Pivot High Call

$2.35 profit so far...That is the amount the SPY has dropped from the InTheMoneyStocks.com turn pivot called last Friday. Friday, the markets hit their high with the SPY touching $102.03. Since then, the markets have collapsed back lower hitting a daily low of $99.69. Cycle work was used here to call the pivot high. This pivot was given to our premium subscribers in the Research Center and Intra Day Stock Chat. Other major calls from the last week were the dollars bounce, nailed to the penny, the oil drop, oil down $2 from the call and the gold fall, down close to $30.

The market continues to trade on the weak side today. Support continues to be $99.75-$99.80. Should that break, the intra day support would be $99.50. To get the daily major levels, join the Research Center or Intra Day Chat Room.

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How InTheMoneyStocks Knew The Markets Would See New Highs And Called It Perfectly

Per the analysis on the blog post earlier this afternoon as the market was tanking off the highs, Chief Market Strategists were alerted this market could see the highs and possibly new highs on the day. This is how: The 10 minute chart was coming into a major level of support. Not only was the 200ma being hit but also the 50ma. This area on the 10 minute chart was a huge level and should be major support. In addition, the 60 minute chart had a major necktie support level at the 20ma and the 50ma. This was also huge in itself. However, combine both chart time frames and you have the Great Wall Of China support level. This alerted the Chief Market Strategists and they alerted the Intra Day Stock Chat guys to not short the market but instead look for a possible pop off that level. Sure enough, a monster rally shown in the two charts below took place. This most likely was a comination of amateur shorts jumping on and not knowing the levels Chief Market Strategists at InTheMoneyStocks.com had seen and getting squeezed out, forced to cover.

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Chart Analysis + The Manipulation Factor

As the dollar headed south over the last 6 months, many wondered if it was about to collapse. Hedge funds, mutual fund managers, individual traders and investors had and are still short the dollar. The rally since March has coincided directly with the fall in the dollar. The yearly highs on the dollar were made in the first week of March and sure enough, the low of 666 on the S&P was also hit in the first week of March. Clearly, the rally has been a re inflation rally but there are other factors at work. The Federal Reserve has been a direct culprit of weakening the dollar. Believe it or not the dollar's drop was an obvious method of the Federal Reserve and possibly the PPT (Plunge Protection Team) to stop the markets from collapsing.

While technical analysis provides us with almost every major and minor move of the markets, oil, gold and the US Dollar, common analysis of motives of the Federal Reserve must also be analyzed. This adds a new dimension to confirm and solidify the technicals. We all know the Federal Reserve has been printing money, trillions in fact. Money to buy bonds, bailout banks, stimulus packages and more. However, it goes even deeper. Ever since the run up in the markets dating back to 2006 to 2007, oil stocks and other commodities have been added to the S&P 500. The weighting has increased more and more. This has made it so the market's overall are tied extremely tightly to the price of oil and other commodities. Therefore, the price of commodities is directly related to the levels of the S&P and other indexes. To manipulate the price of commodities higher would have a direct bailout effect on the markets. When oil is higher, the markets are higher.

Knowing this, it is no wonder that when the dollar topped out in March, the markets also bottomed. The Federal Reserve has a direct impact on the dollar. They are the printers or the money tree of the markets and the United States. This, alongside the bailouts and stimulus packages (which are both dilutive and cause the markets to drop) were bullets in their gun to help the markets regain their strength.

The problem is, it is a double edged sword. While causing the dollar to fall in the near term has helped the markets regain their mojo, it can have very detrimental effects. Our country is financed by other countries as they buy our debt. This is seen in the form of bond auctions where the interest paid is on the rise. If the dollar is losing value rapidly, other countries do not want to buy our debt. This is mainly due to the fact that in 10 years, 20 years or 30 years, these countries expect the dollar to be valued much lower based on the current drop priced out over those longer time periods. The only way they will buy the debt is if a higher interest rate is paid making up for the dollar's drop plus a profit. So, while a dropping dollar is great for the markets in the near term, if the money flow is turned off, we could spiral into a new liquidity problem even worse than what we saw in late 2008 and early 2009.

Now looking closely at the dollar recently, InTheMoneyStocks Chief Market Strategists saw a major technical support level on the dollar. On the UUP (dollar ETF) it was at $23.00-$23.05. This happened to be a major pivot from 2008. Closer calculations revealed it was a monstrous support level and cycle level as well. While this was a dead on indicator that the dollar was about to bounce, the Manipulation Factor confirmed it. What was this manipulation factor? As the dollar approached the major 2008 support level, Chief Market Strategists also realized that in the coming days there was a 3 year, 10 year and 30 year auction. There was no way the Federal Reserve was going to let the dollar continue to collapse into this auction. Why not? Because foreign countries, our debt buyers would be less inclined to bid on it in a free fall. In other words, push the dollar higher into the auctions to increase the likelihood of buyers willing to purchase the bonds for a lower interest rate.

Sure enough the dollar rallied on the InTheMoneyStocks call. This new factor, the Manipulation Factor must be used in conjunction with technical analysis. It is a great confirming indicator and can truly help one make profits. Look at the bigger picture; it was clear as a bell in this case.

Learn the game. Nothing is as it seems but a well educated investor can be aware and avoid the traps even profiting from the Manipulation Indicator.


By Gareth Soloway,
Chief Market Strategist
InTheMoneyStocks.com
The Leader In Market Technical Guidance
 
Weekend Technical Guidance & Setups - Bernanke's Pump Caps Week...DOW 9500 But Scary

Weekend Technical Guidance & Setups Video - Bernanke's Pump Caps Week...DOW 9500 But Scary (click here; video posted to our blog)


InTheMoneyStocks.com breaks out the key technical analysis techniques they have become famous for. They analyze the charts on the market to showcase their technical trend line analysis, price, pattern and time values. By utilizing these methods and not using the common technical tools which almost never work anymore, they are able to call every major and minor market move avoiding Wall Street hype. InTheMoneyStocks.com looks at major support and resistance levels on the charts telling their viewers where the market will rise and fall. They talk about major rules that must be learned. Enjoy and come get their premium daily, month, weekly and intra day expert guidance on the markets, gold, oil, us$ and stocks in their premium nightly videos, daily market reports, pro trader watch list, hidden gems and technical tactics. All included in the Research Center for just $49.99/month. Best value and guidance on Wall Street by those that avoid the Wall Street hype! RealTick graphics used with permission of Townsend Analytics, Ltd. ©1986-2009 Townsend Analytics, Ltd. All Rights Reserved. RealTick is a registered trademark of Townsend Analytics, Ltd.
 
Market Sells Early On China Drop, Oil Weaker And US Dollar Slightly Stronger..Worri

Market Sells Early On China Drop, Oil Weaker And US Dollar Slightly Stronger....Worries On Recovery

It all started last night with China....China dropped nearly 7% last night as worries remain. The key with China is that they spent all their stimulus money to buy up commodities and pump the economy assuming when it was spent, the US consumer would be back to spending. However, their stimulus money is spent and the US consumer is not spending. This is causing panic in China and their stock market is now down about 20% for the month of August. The US markets have yet to really sell as early day selling, generally leads to late day floating because of lack of volume and buy programs. Today is starting the same, will it end the same? Keep in mind that while volume is decent so far, by mid day and late day, there may be no volume. This week is one of the highest vacation weeks for traders. Markets continue to sell, watch the key 10am and 10:30am ET key reversal time frames. Watch the $102 level on the SPY and right below that the $101.75 level.

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Spy (s&p) groundhog day

Lately it has been very common for the SPY to make a low in the first half of the trading session and move higher throughout the day. This has been the layup trade for months. If the financials are not rallying it is usually the energy stocks. Keep this play until it fails especially in this light volume environment..

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Maybe you are right but I've just sold to close, in disgust- :)

Looking at it in retrospect, I can see a potential double bottom there, with a possible breakout, But the averages are going down and the hourly chart does not appeal, either.

I wish I had shorted on the average break, earlier. But that is hindsight.

Still, it will be interesting to see who is right. In the meantime, I'm going for a walk.
 
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Market Whips Wildly As Massive Runup Into 10am ISM, Pending Home Sales, Construction

The market gapped lower and then started to rip. It raced higher as the dollar came in, oil rallied and the market awaited the 10am economic news. The news came out generally positive across the board. The markets shot higher initially and have now whipped lower. Overall, the markets are slightly positive on the day. Volume should decrease as the day goes on. Keep an eye on $102.50 as support on the SPY and $103.25 as resistance.

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ITMS Rant and Rave Blog
 
2010 Should Be A Doozy!

2009 is now being called the turnaround of the “great recession.” For the sake of the world, I suppose this is better than the “Second Great Depression.” However, one must ask, what has really been changed?

Easy money was, and remains to be the cause of every boom and bust. Now, let’s examine the current scenario and see how it stacks up. It could be said that the $8000 first time home buyers tax credit is easy money. Then isn't the recent $4500 cash for clunkers deal also easy money? What about the greatest coordinated global stimulus package the world has ever seen, isn't this more easy money? Accompany this with the greatest bailout in world history of the “too big to fail” banks and you are left with an insurmountable amount of easy money – believe it or not, this is only the beginning. So, what has really changed? The answer is simple, absolutely nothing. Aside from the feverish printing of further ill-considered, easy money dollars, foreclosures, delinquent mortgages, lack of savings by U.S. Citizens, and poor job creation will be around for the next 7-10 years.

2010 should behold one very similar trait to other zero years of a decade, and that is down. It is very possible to see a retest of the 2009 lows and possibly a move lower. This market is not going much further for years to come. Repeating what brought this economy to its current state will only perpetuate the current problems, and prolong a cure. Consider this, if an individual maxes out their credit lines, they cannot simply wipe their hands clean and obtain new lines in an effort to bail itself out. Well that is exactly what the U.S. Government and most other governments including China have done. Regardless of political standpoint, be it democrat or republican both are as guilty as the other. Stimulus plans have been taking place since the beginning of the George W. Bush administration in 2001 and have actually grown with the Obama administration in 2009. Has spending been cut? The answer is NO! Both parties have spent like drunken sailors back at port from a year at sea.

This market has rallied on a bombardment of money printing and liquidity being thrown into the system, it’s that simple. 2010 will undoubtedly be a reality check for the public. However, the odds stack up high in favor of the government printing and throwing more money at the problem. In fact, if Las Vegas put odds on this event occurring it would most likely be an even money bet right now. Currently, this can all be seen as an attempt to re-inflate this flat tire. The question remains, how many patches can someone put on a tire before they need a whole new wheel? Going forward the powers that be better hope the flat tire doesn't cause the car (economy) to drive off a cliff, or hit a brick wall, where it is beyond repair.


Nicholas Santiago,
InTheMoneyStocks.com
The Leader In Market Technical Guidance
 
Cataclysmic Event On Horizon For Markets...Either $107 Or Huge Drop Coming

The market is nearing a cataclysmic event and all traders, swing traders need to watch. The trend line below shows us that a close below could signal a hard sell for the rest of the day while staying above will no doubt take this market to $107. The markets are literally on a major point here on this Whipsaw Wednesday and looking for guidance. The nutty market has traded higher over the last two weeks after a big four day drop. As the market continues to just put minor up days together, we see the administration is doing whatever they can to keep this market floating and not crashing. So far it has worked and it has been impressive. Never before have you had such interference in the markets as what we see now. In any case, note how every wild card card is being used every day now to keep this market floating higher. Yesterday it was Bernanke saying the recession was over, today Warren Buffet said things were better than one year ago and he was buying stocks. Last week, Geithner had a town hall meeting to pump, pump, pump and let's not forget Obama has been on tv sometimes twice a day to pump things up. Regardless of everything that has been said above, just follow that trendline. As long as we stay above that trendline, this market is going to $107 on the SPY. If we break it though, watch out!

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195 Billion In Auctions This Week...And Anyone Wonders Why The Dollar Gets A Bid?

With a total of 195 billion in auctions this week, the dollar has caught a bid in the last few days. Why? The free fall in the dollar has had small bounces along the way. This usually happens just before and during large treasury auctions. The logical thinking behind this is that in order to get rid of the US paper, the government cannot have a dollar that is collapsing. When the dollar moves lower quickly, higher interest amounts must be paid to buyers of the US debt to entice them to buy it. So in theory, if the dollar was truly collapsing, there may be no buyers or buyers that would only buy if they were paid 10%, 20% or higher interest rates. Now granted, my example is unrealistic in the near term but you all get the picture I am sure. So please note, for yourselves how the dollar seems to get a mysterious pop going into these large auctions. Could it be some manipulation to try and get more buyers at lower rates for our massive ever expanding debt? I think so. As the dollar firms, follow it into the last day of auctions and see if the dollar starts to drop again. Watch this closely, controlling the dollar directly controls the markets.

Having said that, the dollar of course gained today just before the auctions begin. The markets were mixed to lower with the DOW and S&P losing about 0.4%. Oil was crushed as I had issued a sell signal last Thursday/Friday based on trend line analysis techniques. In addition, technology was extremely strong with the Nasdaq posting a small gain on the day. Volume was very light as it looks like the markets may be on hold until we get the FOMC policy statement on Wednesday at 2:15pm ET.
 
Today Is A Fascinating Day In The World Of The Markets...What Could This All Mean?

The markets are trading flat to slightly higher on extremely light volume. The Federal Reserve began their two day policy meeting and will announce the results tomorrow at 2:15pm ET. This is the major contributing factor to the light volume. What makes today so interesting? Simply put, the dollars action in regards to the the markets. The dollar is getting absolutely blasted today. In fact, after two days of bounces, the dollar has just hit a new 52 week low. The interesting facet to analyze is the markets are only up slightly on the day. This can be looked at as a possible change in character for the markets. Usually any minor weakness in the dollar gives a big push to the markets to the upside. A solid down day on the dollar gives an even bigger pop. Yet here we sit, watching the dollar get smoked and the markets are just slightly higher on the day. Could this be the start of a decoupling of the US dollar from the US markets? Could we be looking at a major change in character. Or are the markets overbought to the point of exhausting and cannot go any higher in the near term. It is interesting to note as well that the dollar is at its 52 week lows and oil is still hovering $5 or so off its highs. If you analyze that difference, that tells us that oil has dropped slightly in recent weeks due to a down grade of the global demand. If it was not a demand issue and purely a dollar play, then oil should be at new highs just as the dollar hits new 52 week lows. This dollar continues to be the driving force behind any major move in the markets though it may be starting to weaken slightly. Watch the dollar closely as there is 195 billion in auctions this week and the FOMC Policy Statement on Wednesday at 2:15pm ET. Most likely, we are in for a wild ride. The question is, which way do we go!

By: Gareth Soloway
Chief Market Strategist
InTheMoneyStocks.com
 
The SPY pattern played out perfectly per the post at 10:51am alerting to it to all blog viewers. Note the chart below as the in spirit of bear flag pattern went to the target. Learn price, pattern and time!

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Beware Of The Analyst, Economist, And The Upgrades

The year was 2007 and the markets were in rally mode. Every economist with the exception of a handful didn't see any problems on the horizon. This was after a sharp downturn in late February 2007 when the market dropped 500 points in a single day. Yes, this was when 500 point declines was not common place. Even after such a sharp drop every economist that I heard was still saying it was a blip on the screen and everything is fine. Sub prime was fine and under control and another rally followed. Then in July of 2007 the markets experienced another sharp decline into August and even then the new Fed Chairman said things were fine. The markets rallied once again into October of 2007 as all looked well in Mayberry. Analyst's from various brokerage firms were literally fighting to upgrade Google to levels over $1500 a share when GOOG was already at a new high and $700 a share. It still amazes me that none of these so called expert analysts and economists from one of the big banks like Citi Group downgraded themselves. By the way Citi Group was over $50 a share at that time.

Then it happened, the next great leg down occurred in one of the most vicious bear markets since the 1930's. The economist's out there all said the markets are fine and will recover shortly(December 2008). The markets nose dived into March 2008 when Bear Stearns collapsed and was bought by JP Morgan for $2 bucks a share(they later paid $10/share to appease the public).

In March 2008, the market rallied after the Bear Stearns collapse which was not called by any analyst or an economist that I know of. The low on the SPX in March 2008 was 1256 and when the SPX hit 1440 in May the bulk of economist's and analyst's everywhere were proclaiming a new growth cycle. Then on May 19th, 2008 the next move down took place in a violent, and fast decline. What happened to the new growth cycle?

As we all know the market has now put in a low in March 2009. This is on the back of a global coordinated stimulus plan by all central banks, a zero percent Fed's fund rate, and money printing that the world has never seen before. What else could the market due for a few months but rally with that kind of liquidity? However, the analysts, and the economists are back in full force. Upgrades and downgrades are occurring like it was 1999 again(we all remember what happened in 2000). It still amazes me that people are upgrading JPM and the rest of the bank stocks now when these stocks have rallied 300%. Where were the upgrades when theses stocks were in the single digits or when JPM was $15 bucks. Lets not forget Goldman Sachs hit a low of $47 a share in late 2008 as well. However, the upgrades come pouring in when it hit $150 a share. Lets not forget all of these stocks have done huge secondary offerings diluting their shares so they are really above their 2007 highs in real terms. Yet the analysts love them up here and the economists say the world is on the road to recovery.

When the economists and analysts all say things are well in Mayberry it is time to get worried. This is something that much be watched. Why? Because it has called every major top in the market since 2000. I'm just waiting for someone to upgrade Lehman Brothers (that still trades on the pink sheets). Then I will know the top is certainly in.

Nicholas Santiago,
Chief Market Strategist
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