Whipsaw Wednesday – Down and Up We Go

Wheeee!  Isn't this fun?

As you can see from Dough Short's S&P chart, we have a classic "cobra about to strike" pattern in the S&P and, while this means absolutely nothing – it's just as valid as any of the other technical BS you'll hear from other analysts. 

If you zoom out to a longer-term view of the S&P, what you see is we are near the top of a rising channel that has held firmly in the S&P since early 2009 and has taken us from a spike low of 666 past the 100% gain of 1,332 a year ago and now on the way to 1,500 – which is 100% gain of the consolidation off the great drop and still short of the Oct 9th, 2007 closing high of 1,565.  

The only thing holding us down at the moment (other than AAPL), is very low expectations for 4Q earnings, as well as 2013 guidance.  BUT, coming through the last couple of months of Fiscal Cliff worries and very negative sentiment numbers from consumers, investors, financial officers and CEOs – isn't it possible that the outlooks we've been getting have been too gloomy and we're in for an upside surprise?  

I was in the mall last weekend and it was packed.  I've been getting reports from our Members, who are a group of very sophisticated investors with high-level backgrounds from all sorts of business sectors, that the economy is picking up and conditions are improving.  I'll trust their opinion over the talking heads on CNBC any day!  

AA had pretty good earnings and projects 7% demand growth next year.  That translates into roughly a 7% growth in Global GDP.  Even if you discount the relationship of aluminum to GDP by 1/3, you're still looking 5% global growth and AA forecasts Global demand to double by 2020 – that's a pretty solid long-term trend.  WDFC is another good indicator of global health and they say they can do 10% better in 2013 and STX just raised guidance and announced they bought back almost 10% of their shares last quarter as an average price of $28 a share seemed stupidly cheap to them (now $31).  

Not only are we seeing some healthy early earnings indicators but M&A activity is picking up and that's the kind of thing that can…