What A Rally! Earnings Season Here We Come! 7/12/10

Before reading, please see the disclaimer in the 'About Me' section.

Again, it has been almost a month since my last post.  I need to do a better job of keeping up with this blog.  Here is my current analysis of the market, as well as an update of my portfolio...

The Wilshire 5000 closed at 11,225.80, down from 11,668.80, or 3.80%, since my post on 6/20/10.  The Wilshire 5000 is now 2.57% below it's 200-Day Moving Average.  The Wilshire 500 closed as much as 7.53% below it's 200-Day Moving Average on 7/2/10.  Since then, we have gained almost 600 points on the Wilshire 500 since then.  Furthermore, the Wilshire 5000's 200-Day moving average has now entered into an uptrend.  This is bullish for the market if it holds, which I think it will.  Earnings start in earnest this week, and I am on the side that thinks we will see them come in better than expected, for the most part.

The Investor's Intelligence Survey was released on Thursday night. This week's reading was 37.0% BULLS, and 34.8% BEARS, for a spread of 2.2%. This is in comparison to a reading of 41.1% BULLS, and 33.8% BEARS, for a spread of 7.3% on June 29th. In an ideal world, we would see the BEAR and BULL percentages cross, and/or the BEAR reading come in at or above 35.00%.  34.80% for me is close enough for government work, especially with the earnings forthcoming this week.  I think the market has become, or did become, overly bearish in the past two months. 

The Volatility Index closed Friday at 24.98, up from 23.79 back on June 20th.

Now for the portfolio...(updated for dividends)
1) Verizon at $26.65, down 12.78% for the year, inclusive of dividends.  However, on July 1st we had a spinoff of FTR.  Verizon shareholders got 1 share of FTR for every 4.2 Verizon shares held.  Therefore, I have received (7) shares of FTR.  Inclusive of the spinoff, my combined Verizon and FTR shares are down 7.41%, inclusive of dividends since my Verizon purchase in the beginning of the year.

2) AT&T closed at $24.83, down 5.35% for the year, inclusive of dividends.

3) GE closed at $14.95, down by .61% for the year, inclusive of dividends. 

4) TBT, the doubleshort U.S. Treasury ETF closed at $36.99, down by 25.84% since my buy. 

5) FXP, the doubleshort China ETF, closed at $37.36, down by 14.07% since my buy, and after a 1:5 reverse split.

6) GOOD closed at $16.98, up by 25.20% since my buy, including the reinvestment of a dividends. 

7) NLY closed at $18.15, up by 5.37% since my buy, inclusive of a reinvested dividends

8) AAPL closed at $259.62 up by 34.00% since my buy. 

9) January '12 Citigroup Calls closed at $.25, down by 43.18% since my buy.  Still long-term bullish on Citi.

10)  GS closed at $138.06, up by 1.44% since my buy.

Overall, the portfolio is up by 3.22% (-4.42% for the DOW Dogs), versus -2.36% for the Wilshire 5000. The current basket of eight stocks that I am currently invested in, including dividends, is down 2.88% year-to-date. The spread between my performance and the overall market (Wilshire 5000) is at 5.58% outperform.

As I have previously stated, I am near-term bullish on the stock market.  Given the Investor Intelligence sentiment which indicates oversold, the beginning of an uptrend in the 200-Day Moving Average,  and corporate earnings (which I believe will be strong), I believe we are about to see a new uptrend in the market.  Looking further out, I believe the elections in November will yield a more conservative government than most are counting on.  The last time we had a Democratic president, and a Republican Congress was in Clinton's term, and the market performed quite well.  Looking at it in the micro sense, I believe these events will be bullish for the market, and more importantly, my portfolio: 1) the government will be completely out of Citi by fall, good for a few points, in my opinion, 2) Goldman will settle with the government, 3) FinReg will finally be passed, removing a lot of uncertainty from financial stocks, 5) the government will finish up stimulus spending, and 6) financials will see strong earnings as interest rates continue to be held near 0.

In my personal portfolio this past week, I bought Jul '10 SPY $110 calls for an average of $.3088.  I also have an order in for a GOOG $670/$700 call spread for $8.25.  I am encouraged by a series of late day rallies in the S&P from this past week, as well as the prospect of strong earnings this week.  Specifically, I think Google is a good value at this level, and we will see an earnings surprise on the back of strong Android results.

Going forward, I am going to try to do a better job of explaining the trades I am making in my personal portfolio, as well as their results.  Happy trading!