Earnings Drive Stocks

From Ryan Detrick:   Going back to 1991, what happened the past 12 times S&P 500 earnings were more that 10% for the yr?

The S&P 500 was higher all 12 times on a total return basis with a avg return of nearly 17%.

We are looking for mid-teen earnings growth this year, which should be a good sign for bulls.


Hat tip Ryan Detrick of LPL Research


Higher Mortgage Rates And The Housing Market

Will higher rates damage residential real estate?  A history:


As always, great stuff from Charlie Bilello



Furious TBT(Ultra Short Bonds)Call Buying This Morning


The TBT(ProShares Ultra Short 20+ Year Treasuries)has had a rough week.  The ETF moves is the  inverse(double)of the TLT(iShares Barclays 20+ Year Treasury Bond Fund).  With bonds mounting a powerful rally off the March lows the inverse funds(TBT/TBF)have been especially weak.  Bob has pointed out that today’s call volume in the TBT has been extremely robust.  16,000 April 37 calls have been purchased between $1.08 and $1.19 just as the TBT begins to test a very solid support zone.  This support area, which includes the summer highs as well as the October peak, runs from $37.20 to $36.80.  Also in this area is the upward sloping 50 day moving average.  In addition, the 1/3 retracement level of the powerful rally off the September/December double bottom equates to the summer highs.  We continue to expect rates to creep higher throughout the year and are trading in and out of TBT and TBF.  The current set up may provide a low risk buying opportunity although we are not adding to our small TBT/TBF positions yet. 

At time of publication we are long both the TBT and TBF in some managed accounts.

Hat tip Bob von Halle

Warning Signs From The IPO Market?



Hat tip SeeItMarket.com


Manufacturing Leads Earnings


From the desk of Ryan Detrick:   Manufacturing leads earnings by about 6 months. With manufacturing making a new cycle high recently, this bodes well for continued strong earnings growth …

Rollbacks matter…



Merck Continues To Base Near Major Support


During the February flush Merck dipped down to major support near the multi month 2017 lows: https://twitter.com/GarySMorrow/status/962050938444775424The stock has continued to base since then but has had trouble gaining noticeable traction.  Recent option activity paints a more bullish picture for the stock.  We remain positive on the current bottoming pattern.  Here’s a closer look at Merck’s option activity from Bob von Halle:    Over 12,000 May 55 calls have been bought today around $1.95, which is a significant amount of one day activity in this name. That adds to the large open interest in the April 57.5 and April 60 call strike prices that have 17,000 and 13,000 outstanding contracts respectively. Implied volatility is modest at around 19%. Next earnings report not due until May 1st, which will capture today’s activity. 

We are long MRK in most managed accounts.

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