3 Reasons to Watch the Stock Market Next Week

The uptrend the market’s been riding for the last two months finally took a breather this week, but does that mean we’ve seen the end of gains this year? Lots of people, especially technical guys are beginning to think so.

But not so fast… let’s take a look at the charts:

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On Monday, the stock market took a big dive on investor fears about financial industry earnings and jobs numbers. That drop signaled a big change in the way the market’s been going for quite some time now; it was the largest single-day drop since late February.

Taking a look at the chart above, it’s clear how Monday curbed the uptrend. What’s also starting to unfold are the technical reasons to worry about more of a drop in May – right now, a descending triangle is starting to form, a bearish signal that the market’s due to break out to the downside.

But those who see the patterns alone pushing the markets down in the next week will probably be sorely mistaken. While a bearish chart would normally be a dark cloud, the fact is that fundamentals are carrying the markets right now. Chart patterns are going to be secondary for a while.

Now, that doesn’t mean that things are going to be great for the rest of 2009 – the are a lot of fundamental reasons to forecast another pullback in the markets, but I think that the biggest takeaway from this trading week is the fact that once again we’re seeing a market that’s yet to make up its mind. When it does, we’ll see a decisive move one way or another, but until then, there’s still a lot more information for investors to digest.

Regardless of what anyone says, suggesting that the market will rise next week or fall next month is pure speculation. Let’s just stick to picking Rhino Stocks and leave the guessing games to the gamblers.

Harmful Headlines

As usual, the headlines in the financial media have been anything but helpful in cutting through the clutter of market “news” that’s been going around. On Thursday, news outlets grimaced at an increase in new jobless claims for the week, pushing aside the fact that the four-week average of jobless claim initiations – a more trustworthy number actually dropped slightly. That’s good.

Earnings announcements continue to be a big deal this week – companies reporting tomorrow include 3M Corp (NYSE:MMM), Ford Motors (NYSE:F), and Schlumberger (NYSE: SLB).

3 Reasons to Watch the Market Next Week

From an earnings perspective, next week should be an interesting one. On April 28, EMCOR Group (NYSE: EME) reports their first quarter earnings. We’re up 22% right now on the stock. Also reporting next week is SPX Corporation (NYSE:SPW). The company reports their Q1 earnings on April 29. SPX Corp has been a wild ride of late – we’re currently up 2.5% on the stock.

With one of our watchlisted stocks also reporting earnings on April 28, this should make for an interesting week indeed.

Disclosure: EME and SPW are positions in the Rhino Stock Report’s model portfolio.

Friday Market Recap: Earnings Season Edition

Another surprisingly good week for the markets as investors perpetuate the rally that we’ve been riding for the last month. Part of the reason? It’s earnings season! Let’s take a look at the chart:

The S&P 500 has been behaving well – relatively. Since its latest bottom on March 9, it’s done a good job of pushing upward 26.6%. Since last week’s recap the S&P is up a noticeable 4.9%. But the question now is whether the trend will continue…

If you take a look at the chart above, the S&P is rising, but it’s curving – meaning that the rate at which it’s moving it beginning to taper off. That’s somewhat disconcerting for investors who are going long now. What’s important to note is the fact that the tapering we’ve seen over the last week could just be the market consolidating – only one day closed lower than the previous this week, and volume stayed consistent: that’s a good sign.

Another good sign is the bounce the market made around the end of March. The S&P hit its 50-day moving average (the graph of its average price over the trailing 50 days), and bounced off – that’s a bullish signal that indicates investors aren’t willing to part with stocks below that level. For now.

It’s Earnings Season

Part of the reason that the market has been up so notably this week is because it’s earnings season. As companies start to let investors know how the first quarter of 2009 treated their corporate coffers we’re going to be able to get an idea of just how much longer we’ll be talking recession. So far, it’s been a mixed bag.

Early in the week lower retail sales pushed the market down despite companies like Johnson & Johnson and Goldman Sachs reporting better than expected earnings on Tuesday. And yesterday beleaguered bank JP Morgan delivered record-breaking revenues. Not everyone beat analyst expectations, though – big names like Intel and Southwest Airlines missed their numbers, and their stocks tumbled as a result.

Watch the Rhino Stocks

The Rhino Stock Report’s portfolio is doing very well right now. This week, our stop loss on j2 Global Communications (NASDAQ: JCOM) triggered, selling the position off at a 40% gain.

At present three of our remaining open positions – EMCORE (NYSE: EME), Iconix Brand Group (NASDAQ:ICON), and Computer Sciences Corp (NYSE: CSC) are up double digits as of this writing.

Friday Market Recap: A Timeline of 2009’s Recession

First and foremost today comes an update on our JCOM position. As of this writing, the stock is up 43.3% since I recommended it in the February 2009 issue of the Rhino Stock Report. We’re sliding up our current stop loss to $23.80, ensuring a 40% minimum gain on this play.

Since the markets will be closed tomorrow in observance of Good Friday, our normal Firday market update is going out today. And since the markets seem to be moving based on fundamentals this week, I thought we should take a look at a market timeline instead of the traditional technical chart:

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As you can see from the S&P 500 6-month chart above, there’s been a lot of news moving the markets in the past two quarters.

The S&P is up 2.28% since last Friday, pushed largely by Wells Fargo’s record earnings announcement today. While banking stocks have been out of favor for a while, the revelation that Wells expects to rake in $3 billion in profits sent the sector up in a big way.

The announcement managed to outweigh Wal-Mart’s flat sales in March.

It’s true that fundamentals seem to once again be taking their rightful place in moving this market. While last week’s market predictions still hold, earnings season is bringing a whole new element to how things should stand for the coming week.

Hopefully, investors are beginning to realize that contrary to popular belief, value investing isn’t dead (if you haven’t read my take on why, click here)… What could be better proof of that than our performance to date?

Position Update

At present, our open positions are up 10.18% on average, lead by j2 Global Communications (JCOM), up 43.3%, EMCOR Group (EME), up 23%.

SPX Corp (SPW) and Computer Sciences Corp (CSC) are up 16% and 14% respectively.

What even more exciting is the fact that our original Rhino Stock position, Iconix Brand Group (ICON) burst into positive gains today, currently up by 3.16%. This stock has been oversold on technicals, and is finally starting to regain ground.

Along with our closed positions, which average 24%, we’re looking at total returns of 15% since inception. During that same time, the rest of the market was down 12%.

That means we’re outperforming the S&P 500 by 27%. Let’s keep those returns coming in 2009.

Disclosure: All stocks mentioned are long positions in the Rhino Stock Report’s model portfolio.