Stock Market Short-Term Not Bad... Mid- to Long-Term Not Great... Goldman Settles... Gulf Capped... Google Smoked....

Stock-Markets / Stock Markets 2010 Jul 16, 2010 - 03:14 AM GMT

There is no denying that this market, and more importantly, this economy, is in some very big trouble. The fundamentals are in terrible shape. Two reports on manufacturing (NY State and Philadelphia) this morning were worse than expected. Actually, not just worse, unbelievably worse. Just fell off a cliff is the best way to put it. No matter how anyone wants to spin things, they are in terrible shape.

So why, you ask, didn't the stock market fall apart? Simple. Sentiment! Just too many bears. We have an inverted bull-bear ratio, and this reality is holding the market up for the short-term. However, one has to wonder how long even sentiment can hold things up if this type of economic reporting continues showing the future not looking very bright. I'm wondering what the final report will be that tips the market back lower. I'm hoping sentiment holds things up no matter what gets reported, but you really do have to wonder.

So, sentiment tells me the short-term has some possibilities. I wouldn't get too excited. The S&P 500 needs to convincingly clear 1094. Then it has a shot at 1131, the most recent high. However, getting back to 1220, S&P 500 seems remote at best. I just don't think that has much of a chance of taking place this year if these reports on the economy continue to flow in. I would lose those high expectations for this market. We're not going anywhere near that high if things don't turn around soon. Another month of this type of manufacturing reports and we'll be looking at a double dip recession with negative figures.

The mid-term and long-term look bad, to be blunt. It seems that earnings for this quarter are decent, but no one believes the next cycle looks promising. If that opinion holds up, and then becomes reality, look out. Don't get in the way. The market really is at cross roads as is the economy's future. If Bernanke is tipping his hand, he's quietly warning us something bad is coming or he wouldn't have talked about recovery in five to six years. He clearly saw the contraction reports coming that we heard from today, and thus his warning. Unfortunately, if things don't turn soon, we're headed for a rough few years ahead in the market, so be prepared for that possibility.

After hours, Goldman Sachs (GS) did their usual get-away-with-murder routine by settling with the SEC. Nothing bad happened to anyone, and their reward for being bad guys is to have their stock go from 139 to 152. Ah yes, nothing like being above it all and walking on water. Nothing out of the ordinary here. Be crooks. Get caught. Nothing happens. Business as usual at Goldman. This is good news, somehow, for the market, but bad news from Google Inc. (GOOG) on their earnings, and has the future washing out to flat.

Goldman had been under pressure recently, but now all is well. This can only be good for the financials, one would think, for the short-term. I think we've all had it with these guys and girls, but the market caters to their every need and desire. They just can't do enough bad things to have anything bad happen to them. Disgusting, but the way it is, and likely always will be. After all, if they're hurt, the market is hurt. If the market is hurt, so are political careers. Goldman can do no wrong. Not in the past. Not now. Not ever. Get used to it folks.

Google reported lower than expected earnings, and although the stock is down well over two hundred points off their highs, they are down another 20 after hours. Things have hit the wall there. They are hitting the futures a bit on the tech side, but nothing too bad. It would have been worse if not for the Goldman debacle.

As I warned, many nights will be filled with bad earnings, and tomorrow morning things get very interesting as General Electric Co. (GE), Bank of America Corporation (BAC), and Citigroup, Inc. (C) report earnings before the market opens for business. Those reports will have a huge effect on the financials, and the market in general. So far the earnings season hasn't been very good with respect to guidance. In addition, we have news from BP Exploration plc (BP) telling us the gulf spill has finally been capped. Shameful, but let's just be thankful that the bleeding has stopped, and now we get to clean it all up.

Nothing is going to be easy here folks. Cash is a wonderful position, like it or not. Nothing aggressive as the two big forces collide. Sentiment versus poor economic news. Please go slow and easy with your trading.

Peace,

Jack

Jack Steiman is author of SwingTradeOnline.com ( www.swingtradeonline.com ). Former columnist for TheStreet.com, Jack is renowned for calling major shifts in the market, including the market bottom in mid-2002 and the market top in October 2007.

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