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Earnings Season has started

Light volume up day at the start of the earnings season (SPY didn’t  even trade 150mm shares).Technically plenty of stocks are starting to test the next level of resistance, either the 50day or the 200 day MA — most of which are still sloping down. Could the failed Head and Shoulder be the bottom for now of these markets? that is what we are testing out for the next few weeks, earnings will play a big part in answering that question. For the most part analysts and companies have lowered expectations for the 2Q, as can be seen by the beat in AA and CSX last night. My expectation is that companies might beat 2Q earnings expectations but will remain caution about the 3Q – seems like the right thing to do with the unemployment levels still very high – any upbeat 3Q guidance will be taken as a positive surprise by the markets..

Portugal was downgraded this morning, yet the impact doesn’t seem to be as negative as other downgrades, for one S&P kept a stable outlook for the next 12months. Also Greece was able to issue some 6month bonds at below the 5% level, a decent reentry into the funding markets.

Recent upgrades for the semiconductors is helping the Nasdaq gain some relative strength ($BRCM breaking out nicely), what we need now are the financials to start kicking in some positive sentiments – $JPM, $BAC and $C all report later this week. These two sectors will be the focus of my attention today ($SMH and $XLF).

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