There is NO Magic Here...

Let the countdown begin……T- 12 hrs until the official launch of earnings. Soon after the closing bell rings today we will hear from JPM – later on in the week we will hear from C, WFC, GS and MS…...so the mkt will be on edge all day as the horse race begins. Financials have gotten whipped around lately – as have most of the other sectors and it will be interesting to see how they position themselves in light of the volatile 3rd qtr. How did the volatility affect the bottom line? Was the nervousness and anxiety in the mktplace good for their trading revenues? Will the move higher since early October, cause traders to ‘sell’ no matter what the numbers reveal?

Overall – 3rd qtr earnings have been projected to fall by 5.3% y/y. This decline is due to what is expected to be a big drop in energy company earnings – but this is not new news….asset managers know this – so expect to see the longer term buyers being patient and lining the book on the way down to take advantage of the ‘trader’ knee jerk reaction. But again – the focus will be on the future outlook – the earnings are what they are…..so traders and investors will be looking for the silver lining….defined as ‘real growth’. If that silver lining turns into a black cloud - then watch out below.....The skies will open up and the storm will wash over the whole place....

Yesterday, stocks were little changed on low volumes – there was no significant economic data to report and with banks and the bond mkt closed due to the holiday, there was not much happening in the way of real action.

The mkt chopped around as traders/investors/analysts take their positions in front of what is clearly an uncertain start to the earnings season leaving many to wonder about the recent surge that took the mkt up and thru short term resistance. Was yesterday’s lack of action combined with Friday’s flat performance more indicative of a topping pattern after this move higher or is it just a pause ahead of this week's macro data combined with the start of earnings. We remain above short term resistance at the 50 dma while longer term resistance levels - both the 100 dma and the 200 dma’s - remain in place – giving pause to buyers as they wonder if this is the start of a real rebound or more just a trading rally off an oversold condition.

Oil – which has been the talk of the town lately – surged higher in the last 10 days taking prices up from $44/barrel thru $50/barrel (or a 14% increase) dragging - Energy (XLE +18%), basic materials (XLB +14%), Industrials (XLI +9.6%), along with it.


(Remember these groups have been under extreme pressure as oil waffled around the low to mid $40’s and calls for even lower prices by some of the big investment banks (GS) as well as by some well known billionaires amid this ‘global slowdown’ continued to weigh on the group.)

But yesterday – oil fell some 5% or $2.50/barrel when the mkt learned that OPEC produced more oil in September than they did in August – this news coupled with the fact that technically oil was hitting resistance at the $50/barrel gave traders a reason to take some money off the table in these same sectors to either put money to work in sectors that benefit from lower oil or keep it dry as we enter the confessional period. There is no magic here – it is what it is. Now - keep this in mind.....the 4th qtr is typically a tough qtr for oil, so if we see deteriorating corporate earnings and continued talk of a global slowdown then expect to see oil and the broader mkt come under pressure once again.

Technically speaking – the October rally has been strong but we are not out of the woods just yet. The signs continue to point to ‘caution ahead’. The fact that the indexes and many stocks are still trading below longer term resistance, the fact that the 50 dma’s are still trending below their 200 dma’s, the fact that new lows continue to lead new highs over a 10 day cycle and the fact that we are currently in a short term overbought condition all point to a topping pattern.

Look – the August sell off changed the dynamic and the lack of action by the FED coupled with mixed to weaker global macro data has not helped to soothe the mood. The mkt needs time to re-assess and find a bottom and hopefully 3rd qtr earnings will work to do just that.

Overnight – Asian mkts fell – after Chinese trade data disappointed. The headlines say it all:

“China Imports Collapse in September, Exports Remain Weak” …..

China’s exports fell by 3.7% while imports plunged by 20% - marking the 11th straight month of declines…..basic resource names got hit the hardest as this latest data only fans the flames of concern. The weak Chinese import numbers translates into weak export numbers for countries exporting to China – which translates into bad news for other emerging mkts in Asia and Latin America. It’s a vicious circle. But within China the news was not so bad…..Autos surged and traded ‘limit up’ as reports show that vehicle sales are strong. Investors also got a boost from news that the PBoC (Peoples Bank of China) is considering additional stimulus. Japan -1.1%, Hong Kong -0.82%, China +0.18% and ASX -0.57%.

In Europe this morning – the scene is more of the same. Mkts under pressure on the back of the China news……(like a broken record) as the fear of reduced demand from China permeates its way thru the mkts. Most sectors in the red - no surprise there......the mood is negative and so trader types will sell into the anxiety ....

Apparently autos in Europe are not enjoying robust growth like they are in China causing Peugeot, Renault, BMW and Volkswagen to all come under pressure. Basic Resource names are also under pressure due to the China syndrome..... Macro data in Germany has the all important ZEW index falling sharply - down 9 pts at 55.2. Emerging mkts taking the brunt of the blame - but the Germans are not worried about falling into recession..... In the UK - inflation remains NON EXISTENT so do not expect any move on interest rates in that nation either. FTSE -0.81%, CAC 40 -1.35%, DAX -1.09%, Eurostoxx -1.05%, Spain -1.26% and Italy -0.70%.

And as the sun rises over the east coast - US futures are down 6 pts - makes perfect sense considering the state of affairs around the world and the fact that the mkt is a bit ‘toppy’. Any negative news will cause traders to ‘shoot first and ask questions later’….. I would expect the mkt to test the 50 dma which is now SUPPORT at 1991......but any disappointment in earnings and you can kiss that good bye.... Resistance can be found at 2045.

There is no eco data today so the focus is on earnings and on NY FED Pres Dudley...who is hosting a lunch at the Economic Club of NY.....and tonight at 8 pm - Stay tuned - It's all about Vegas as the Democrats hold their first national debate......

Roasted Chicken with Mascarpone

I had this dish at a friend's house a couple of years ago and still find it to be one of the favorites. It is simple to make presents beautifully at a casual dinner party.

For this you need: Chicken Thighs (skin on) , s&p, & Dried Oregano, fresh lemon juice.

For The Sauce you need: Pancetta, Diced, Finely Diced Onion, Garlic Cloves, Minced, Dry White Wine, Chicken Broth, Fresh Thyme Leaves, chopped, Dijon Mustard, S&P, Mascarpone Cheese

Preheat oven to 375 degrees.

Squeeze a bit of lemon juice on the thighs then season with s&p and oregano - massage the thighs and then place in a roasting pan and roast in the oven until golden brown, about 40 minutes. Turn the pieces over halfway thru so that you brown both sides.

While the chicken thighs are roasting, cook the pancetta over medium heat for 5 mins - in a large frying pan - (large enough to hold the chicken pieces). Now add in the garlic and onion and sauté for about 8 - 10 mins.

Add the wine, and raise the heat, and stir to deglaze the pan and reduce the wine by half. Add the chicken broth, thyme, mustard - maybe a tsp or so, s&p, reduce the heat to medium low and continue to cook until thickened, about 10 minutes. (Now if you are making say 6 pieces then you want about 1 cup of wine and broth....if you are making more then add a bit more of each)

Next whisk in the mascarpone - about 3/4 cup, (again if you are making more then use more mascarpone) - taste, adjusting seasonings. Turn heat down to low to keep warm.

When the chicken is done then remove from the oven and place in the sauce. Spoon the sauce over the chicken pieces to coat well.

Cover and cook for 5 minutes over low heat, then place the chicken on individual plates - spooning the sauce over the chicken pieces and serve with roasted butternut squash and a large mixed salad.


Buon Appetito.