Optimism Continues Around the World, CAT Guides Up

Monday, April 26, 2010

Asian markets and European markets generally traded higher overnight across the board. Positive results from a US bellweather, Caterpillar (CAT) are boosting futures this morning in New York. CAT reported EPS of $0.50 (ex a charge for the healthcare plan) versus expectations of $0.39. Revenues were lighter than expected but upside guidance impressed the Street with CAT forecasting FY10 EPS of $2.50-3.25 versus $2.69 consensus. It's a big week of fundamental concerns. Goldman CEO, Lloyd Blankfein, will spend his morning tomorrow testifying before the Senate Permanent Subcommittee on Investigations about GS's conduct during the subprime boom. I doubt he'll have too many friends on his side throughout the grilling. The FOMC releases its interest rate decision Wednesday, once again the focus is likely to fall on the language Bernanke and his cohorts adopt in the statement.

On a side note, really Joe Biden? Our highly successful prognosticating Vice President was quoted as saying: "Even some in the White House said 'Hey, don't get ahead of yourself.' Well I'm here to tell you some time in the next couple of months we're going to be creating between 250,000 jobs a month and 500,000 jobs a month." (CNBC) I refer you to my post in December entitled "Our Ugly Jobs Picture" where I highlighted our month-to-month employment situation. In the last 10 years, should you look at just the months of gains in jobs you come out with 178,900 job additions on average. These months of gains were at the height of the tech boom and throughout the leveraged real estate boom. I hope he is right but I do not see where these jobs will be created, especially in the next couple months.

I have a small position in GLD again after taking a break from it for a few months after it cracked in December. The world's favorite metal broke out of its consolidation pattern to the upside earlier this month and has since retested the top side of the channel. Friday's powerful move higher has confirmed my long bias and I will look to add shares of GLD through $114 for a swing back to highs and potentially higher.

I still have shares of Nike (NKE) long, looks great above $78.50. I have a small position in AEM, looking to add through $62. Picking up some shares of POT for a longer-term swing, more on that trade later this week and note earnings are on Thursday.

Disclosure: Long NKE, GLD, AEM.
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