Smart Investing/Trading for the week ending July 18 2008

US Market Update and Outlook

Stocks face heavy earnings week with new hope
On tap: Earning from Bank of America, American Express, Apple, Caterpillar

Marketwatch: Investors will start next week -- one of the most loaded of the second-quarter earnings season -- hopeful that a nascent positive tone on Wall Street will continue to lift stocks. Crude oil prices seems to be on a downtrend while earnings so far seem to be not as bad as feared."This was an inflection week," said Alec Young, strategist at Standard & Poor's. "We've switched from never-ending worries about credit, the economy and oil to actually looking at earnings. Although fundamentals still need to improve, stocks precede fundamentals." The past week saw some of the biggest financial institutions, such as Citigroup Inc. post second-quarter results that came in above Wall Street's already lowered expectations. Even Merrill Lynch whose results came in lower than expected, saw its shares rise modestly Friday. According to Thomson Financial, 73% of the 88 S&P 500 firms that posted results last week topped expectations, above the average 60%. "The good thing about bear markets is that they price in such bad news that it becomes easy at some point to surprise positively," said Alec Young, strategist at Standard & Poor's. "This time around, we've seen this happen especially in the financial arena. The results are not good but they're not as bad as people feared." Investors will next week turn to more earnings from the battered financials, with Bank of America and a flurry of regional banks throughout the week. The Dow Jones Industrial Average gained nearly 50 points, or 0.4%, to end at 11,496 on Friday. The S&P 500 ( rose fractionally to 1,260), while the Nasdaq Composite dropped 29 points, or 1.3%, to close at 2,282.

Earnings on tap

Next week, a flood of earnings will greet investors with 158 S&P 500 companies due to report. Overall second-quarter earnings are now expected to have fallen 17.1% from the year earlier level, weighed down by an 81% drop in financial-sector earnings and a 20% drop in the earnings of consumer discretionary firms, according to Thomson Financial. By contrast, the energy sector is expected to post year-over-year earnings growth of 25% and the tech sector of 16%.

Weekly KLCI Update and Outlook

ICap on Weekly KLCI. Given its very bearish MACD and DMI, the KLCI has been falling constantly over the past two months and even the weekly RSI is now oversold. The market sentiment remains fragile even as worries ease over the domestic political concerns. Externally, however, the KLCI is now positioned to benefit from any sort of market rebound. Hence, we would expect KLCI to find strength around present levels unless the monkeys play up again.

* Space tourist/participant also can be a Datuk. What did we benefited from the costly visit? Did I hear years ago that some revolutionary studies will be conducted in space to help mankind? Where are the findings now? We just do not learn!!!