Earnings are Up, but the Market is Down??

So what does today's turnaround reveal? A number of things - some we knew, some we suspected, and some we were reminded of. Let's list:

(1) This market is still operating largely off of technical, meaning technical levels, with what appears to be a low end of 1000 and a high end of 1100 on the S&P. Strong technicals in between there are 1040-1044 and 1070. The retreat from 1100 today was partly based on this factor. Note, the 200 day moving average is at 1110 currently, supporting that 1100 ceiling.

(2) Fundamentals -- speaking to the previous posts -- expectations for a strong 2nd quarter are being seen in most profit and revenue reports so far during earnings season. However, most all companies are showing continued weakness in critical areas of business along with cautious comments about the 2nd half of 2010. The forward-looking comments are the real focus this earnings season and these are keeping the market hesitant and range bound.

(3) Restrained Consumers -- the savings rate is at a 6 year high at a level of 4% now. Add on to this reports that consumer sentiment and confidence is down and you get fears that consumer spending will continue to stall (retail declined for the 3rd straight month according to this weeks report).

(4) General uncertainty --- business can't operate fully and freely when there is uncertainty, and that's most all we have right now. Considering the potential for raising taxes, Nov. upcoming elections, financial reform implications on banks businesses, future consumer spending, future job creation, and continued restrained credit -- it doesn't look like many of those are going to be solved overnight and this factor is going to exist for awhile.

(5) Housing -- and this is interesting because we get alot of housing data early next week (and its going to continue to be bad). Housing is in a double dip; no doubt about it. Deal with it. And the economy needs to deal with it too. And it will by selling off. Housing is fundamental to consumer wealth/financial stability. It's also crucial to the job creation that existed this past decade as well as our nations balance sheet (with over $1 trillion in mortgages supported by fannie/freddie and them causing losses of up to $400 billion in the end --- all of which is not actually counted in the US Debt figures mind you).

All in all, some of these factors will improve here and there (corporate profitability, uncertainty of the financial reform now resolved, doesn't look like raised taxes soon, and the elections will pass). However, others of these factors will continue to weigh on the market. That's why traders are fighting and living in this sideways 1,000 pt range and look to continue to for the time being -- or until a majority of these factors truly shifts to the positive (or negative).