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inthemoneystock (< 20)

Alert: Market To Hit 52 Week Highs



July 19, 2011 – Comments (1) | RELATED TICKERS: SPY , UUP , AAPL

The average investor is almost as bearish as when the markets were at their 2009 financial crisis lows. With a possible default looming in the U.S. if the government does not raise the debt ceiling and a cliff dive of disaster nearing in Europe, the sentiment is highly bearish. This makes the smart investor realize a possible upswing is nearing. In fact, it may have started today with this move. While somewhat shallow, this upmove should take us back to the 52 week highs on the S&P 500. The SPDR S&P 500 ETF (NYSE:SPY) is currently trading at $131.62, +1.01 (+0.77%).  The 52 week high on the SPY would be $137.18.

Inevitably, the debt ceiling in the United States will be raised. The markets will spike higher on it. In addition, earnings should continue to be better than expected. As things quiet down in Europe in the short term, the Euro will gain traction and the Dollar will fall. A falling Dollar pushes the U.S. markets higher.  The PowerShares DB US Dollar Index Bullish (NYSE:UUP) is trading at $21.41, -0.07 (-0.33%).

Today, after the market closes, Apple Inc. (NASDAQ:AAPL) will report earnings. The stock has rallied sharply into earnings. The earnings will most likely be stellar, but the big question will be, how does the stock price react. After such a gain, it is hard to imagine more than $10.00 in upside. Downside is also possible.  Apple stock has rallied around 20% in the last month. This is an epic rally for the largest market cap stock out there.

Gareth Soloway

1 Comments – Post Your Own

#1) On July 19, 2011 at 1:13 PM, davejh23 (< 20) wrote:

"The average investor is almost as bearish as when the markets were at their 2009 financial crisis lows."

You can argue both sides.  Leverage useage and mutual fund cash levels are at levels last seen at the pre-crash highs.  So, the average investor may be bearish, but the smart money is leveraged to the hilt on the long side. 

"earnings should continue to be better than expected."

We've seen several weak reports already.  In addition, even when we see beats, the underlying data is absolutely horrific.  For example, BAC reported a beat in adjusted EPS and the stock jumped at the open only to fall ~4% after investors digested some of the contents of the report.  Take out accounting gimmicks and BAC missed expectations, even ignoring settlement losses, by a mile.

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