Earnings Stop Rally

cisco bad earningsFinally, we get a breather from the nothing but green we have seen in recent trading. Slumping earnings put a dull in trading as investors felt that maybe two weeks of green is good enough. Personally, I feel that the market is extremely overbought and has some severe correcting to endure. Much of the boost in buying has been due to the illusion of "better than expected" results. The genius who came up with that manipulation strategy should receive a reward, because for the past month, companies have been able to report 30-60% loss in revenues from the previous year, all while investors received it with open arms and cheering. It is times like this, where I step aside.

Like I've said in other posts, such "bear market rallies" like what we've seen are present in all recessionary periods. They can be violent and very vicious. However, as we have learned from the past, they can also be a false hope for investors, which in turn can amount to mass losses in the market. I believe it is a false hope and that we will shortly see markets reach much lower levels. What really is paving the way for this is the fact that hundreds of thousands continue to lose their job every month, as we will see this Friday with the unemployment report.

As much as it seems that we are coming out of this hole, we're not. Here are a few reasons why: Personal income continues to trend down, massive monthly unemployment, a commercial real estate market hanging by a string, massive corporate revenue losses, and hundreds of billions being sold in government debt monthly. The market can go up all it wants for a while, but with these economic factors, it is unsustainable. Investor's income is getting eaten into every month, the value of their house continues to fall, and they continue to spend less and less. For me, it is not a question of if it will happen, but when it will happen. Happy Trading.

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PS - In the previous post there was a comment wondering if I responded using an "alias". I would hope that readers of this commentary would not suspect me of such immaturity. I always use my name when responding in both the chat or the comments. I will discuss more woes hitting commercial and residential real estate markets in tonight's premium podcast (subscribe here).


  1. HS Says:

    Good one FF. Keep up the good work of giving your opinion.


    Nice company results.

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