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Eyes Turn to Earnings

January 9, 2013 – 6:03 pm

00120065-0000-0000-0000-000000000000_00000065-0763-0000-0000-000000000000_20120830141359_081012_StockReport_300Earnings season kicked off last night with Alcoa earnings which were slightly better than expected as earnings came in line and revenues topped expectations. The stock started higher in the morning but has faded since then and now sits around the flat line on the day. Some other notable stocks have faded as well today. Many financials such as JP Morgan, Bank of America and Citigroup have hit resistance and are fading. This usually means that the run in the markets is over for the short term. The market is looking tired here as the euphoria and short covering over the fiscal cliff subsides and attention is turned to earnings season and the debt ceiling fight looming just a month or so away.

For those who have some dry powder, meaning cash, I would begin to get your shopping lists ready and try and find levels on the charts that some stocks will find support. We are pretty fully invested in our client accounts, but will be looking to use any more cash left during the next pullback. This year will certainly be choppy, but investors need to embrace that volatility in 2013 and buy the dips. Not every year is treated the same, but that is our outlook over the medium term.

There has been a recent rotation out of safe names and into growth and cyclical companies. This trend should continue for the balance of the year as interest rates rise and investors are flushed out of bond funds and high yielding stocks. It is important to recognize these trends and be on the right side of momentum. Earnings season will give you opportunity, but also carry risks. Discipline and attention to details will determine your success.

Good Trading
Justin Klein

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