Earnings Pack No Punch – Major Econ Releases This Week – Market Correction Near

Last week, the strongest companies announced earnings and the market tried to challenge the all-time high. Sellers instantly stepped in and the market rolled over. We are in the final stages of this rally and the long awaited correction is on our doorstep. Corporate profits are up 1% year-over-year and revenues are up 3%. Stocks are trading at a lofty forward P/E of 16 and these results will not excite investors. Tech stocks have been beaten down and they were overdue for earnings relief rally. That did not happen and it suggests more downside. The market lacks leadership and we are not going to get it from financials, tech or energy. Healthcare has been decent due to M&A activity. However, HMOs are surrounded by uncertainty and biotech stocks are weak. REITs and utilities look good, but this rotation is a flight to safety. China announced that it will not lower bank reserve requirements. Fiscal stimulus will have to spark economic activity and it won't bear any fruit for a couple of months. Economic conditions will continue to slip and shadow banking credit concerns will escalate. Japan recently hiked it sales-tax and that will impact consumption in coming months. The CPI in Europe will be released tomorrow and a weak number could prompt the ECB to push interest rates into negative territory. This seems like a dangerous experiment. Tensions in the Ukraine continue to rise and new economic sanctions on Russia will be imposed this week. This conflict has been completely discounted by the market. The FOMC will release its statement Wednesday and I'm not expecting any surprises. They will continue to taper and they will monitor current economic conditions. The release has the potential to be more negative than positive. Major economic releases (ISM manufacturing, Chicago PMI, ADP and the Unemployment Report) will be posted this week. Analysts are expecting 204,000 new jobs in April. I believe we need to see more than 250,000 new jobs for the market to tread water. Bad weather was blamed for sluggish economic growth and I am not seeing signs of pent-up demand. New home sales fell by 14% and retail sales are barely keeping pace with inflation. Traders have given soft economic data a free pass and patience is wearing thin. I believe we will see one more push higher. In the last two months the market has rallied into the jobs report and it has declined sharply after the release. I'm expecting a similar pattern and the backside could get nasty. I bought put options last week and I will add at SPY $186, $184.50 ad $183. Five-year bull markets die hard and I expect to take a little heat along the way - that is why I'm scaling in. I will use SPY $189 as my stop. Sell in May. Be patient and look for opportunities to get short. . .

Daily Bulletin Continues...