Can It Really Be This Simple?

Another Seinfeld “day about nothing” yesterday took an interesting turn after the bell when Intel (INTC) reported lower earnings and sales on a year over year basis. But the numbers were “better than expected” and supported the bull market’s recovery paradigm. Futures gapped higher after hours.

This morning futures have extended their gains after J P Morgan Chase (JPM) obliterated earnings estimates. How this is a surprise with zero interest rates and a wide yield curve, conditions under which a child could make money, is beyond us. But as we’ve said repeatedly, what matters is the market’s reaction and the market is flying.

Today is an important day. The market has been rising for the better part of two weeks off its recent correction low in anticipation of these earnings reports. Volume has been a bit tepid of late, especially on the NYSE indices. True, Monday was a semi-holiday, Friday the day before a semi-holiday and Tuesday was “the day before the earnings barrage.” But the magnitude of the move and reticence on the part of the bulls leaves some doubt as to whether this is all priced in. In short, the bulls are badly in need of a big win. That would be a strong move to new highs on robust volume.

There’s no doubt we’ll be gapping higher today. But we’ve seen this picture before, most notably last Thursday when good news sparked a gap, a run, and exhaustion into the close. We’ve been arguing since the recent correction began that the uptrend was likely to resume. We won’t change our minds now. But we might if we see selling into today’s widely anticipated ebullience.