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Q2 Earnings to Test Bulls’ Resolve

   For the moment, the prospect of Fed tapering  is yielding the spotlight to Q2 earnings, and more importantly revisions in guidance and earnings projections for Q3 and


For the moment, the prospect of Fed tapering  is yielding the spotlight to Q2 earnings, and more importantly revisions in guidance and earnings projections for Q3 and Q4.

   So far, 73% of the S&P 500 reporting have beat projections, however only 53% have topped estimates for revenues.

   Going forward, companies are going to have to grow the top line, there is only so much dressing they can do at the bottom line by cost-cutting and not spending on hires and plant and equipment.

   If the market is going to advance significantly from here it will have to be as a result of  upward revisions for revenues and earnings  in coming quarters, as well as an expansion in the price/earnings ratios in general.


   The 7.4% surge in the S&P 500 in less than a month has been powered by relief that the Fed has been trying to sell the concept that tapering is not tightening, and the Street appears to be buying it.

   The big risk here is disappointing Q2 earnings.  While damage there should be selective, we can’t rule out a correction.

   Near-term support is DJIA 15,440 9S7P 500; 1,682).  Breaking that the next support is DJIA 15,175 (S&P 500: 1,652).

Investor’s first read– an edge before the open

DJIA:  15,543.74

S&P 500: 1,692.09

Nasdaq  Comp.: 3,587.61

Russell 2000:  1,050.48

Monday, July 22, 2013         (9:10 a.m.)

  Apple(AAPL: $ 424.95)

Earnings due after the close July 23d.  Stock dropped close to $7 Friday. Resistance is $430 – $432.  Support is $412 unless earnings are a big disappointment, then $398 is a possibility. Price cutting in smart phones stands to adversely impact margins.

FACEBOOK (FB – $ 25.88)

Earnings are due Wednesday after the close. Friday’s action suggests the Street is nervous about the report, maybe just hedging its bets after a rise from the $23.50 area. Resistance is now $26, support $25.35.


ECONOMY:  Economic reports continue to reflect a slowly improving economy, not anything that would prompt a change in the Fed’s policy of accommodation. Any acceleration in this tempo will raise concern that the Fed will begin to withdraw from its bond buying program.

   While the Fed believes the Street now “get’s it,” that taper is not tightening, investors cannot be convinced of that, clearly not after the plunge in stock and bond markets after Bernanke’s June 19 comments about tapering starting in Q4 and ending in mid-2014.

   For a detailed account of past and current economic reports, including charts go to:


Chicago Fed Nat’l Activity In. (8:30)   Proj.: Minus 0.03 in June vs. minus 0.30 May

Existing  Home Sales (10:00)  Proj.:5.27 million unit rate in June vs. 5.18 rate May


FHFA House Price Ix.(9:00)  Proj.: +.08 pct May vs. +0.7 pct Apr.

Richmond Fed Mfg. Ix. (10:00)   Proj.:  +0.8 pct July unch. from  June


PMI Mfg Ix. (8:58)    Proj.: 52.8 July vs. 51.9 June

New Home Sales (10:00)    Proj.: 481,000 rate  June vs. 476,000 MAy


Durable Goods Orders (8:30)   Proj.:  +1.5 pct  June  vs. +3.7 pct May. Ex-trans +0.6 pct June

Jobless Claims (8:30)  Proj.:  341,000 (7/20/13)  vs. 334,000 prior week

Kansas City Fed Mfg. Ix. (11:00)  Proj.: unchg  vs. minus an index oif 5 in JUne


Consumer Sentiment (9:55)  Proj.: 84.0 July


July 9   DJIA  15,244   “Bernanke Must Clarify Exit Plan, or……

July 10 DJIA 15,300   “Street Needs Taper Details – NOW”

July 11 DJIA15,291    “Buying The Open Risky”

July 12 DJIA 15,460   “Artificial Stock Prices – Too Fed-Dependent”

July 15 DJIA 15,464   “Bernanke Returns Wednesday”

July 16 DJIA 15,848   “A Must Sell for Bernanke: Taper in NOT Tinghtening”

July 17, DJIA 15,451  “Tapering Not Tightening ?”

July 18 DJIA  15,470 “Bernanke Must Assure Investors Tapering is NOT Tightening”

  George  Brooks

“Investor’s first read – an edge before the open”

[email protected]


The writer of  Investor’s first read, George Brooks,  is not registered as an investment advisor.  Ideas expressed herein are the opinions of the writer, are for informational purposes, and are not to serve as the sole basis for any investment decision. Readers are expected to assume full responsibility for conducting their own research pursuant to investment decisions in keeping with their tolerance for risk.


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