Tuesday, July 13, 2010

INTC's Report To Give Firepower To The Bulls?

The first truly big name of the week delivered, and delivered in a big way. Intel's numbers were strong, and the company's outlook not just respectable but also impressive. The post-earnings reaction seems notorious for selling off, even after solid reports, but thus far Intel has held its ground.

The market is moving aggressively higher after hours, slicing through the resistance we met at the end of the day. Neither ETF rebalancing nor short-covering pushed the market higher at the end of the day, as we actually pulled back right before the close, contrary to the impact that rebalancing leveraged ETFs should have had. However, Intel is providing bulls all the firepower they need to have us pointing toward an open over 1100 tomorrow on the S&P 500.

One name that did not deliver to market expectations was YUM. Top- and bottom-line numbers were solid for the quarter, but the company's outlook was a bit weak. Furthermore, growth numbers, especially after seeing Intel's flashy numbers, were disappointing to bulls.

Has Intel given us insight into the tech sector this quarter or just raised the bar way too high? I would venture that it has done a little bit of both. One thing that it certainly has done is provide a positive tone for earnings and a boost to already increasing optimism.

Volatility actually performed much better in the face of a strong market today, and I would be concerned as a bull if it continues to demonstrate relative strength tomorrow. It is quite possible that bulls were demonstrating some extra caution heading into INTC's earnings report today. I would even conclude that it was likely. Now that we've all seen the report, and it was strong, a drop in the VIX should be seen. If not, then the market will be demonstrating continued concern for upcoming reports.

It is difficult to envision what will turn this market again, as it continues to act like a large vessel that cannot turn on a dime. Once it builds any directional momentum, it becomes unstoppable over the short run......

long INTC

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