A Change in Tone


Editor's Note:

Head-and-shoulders pattern? What head-and-shoulders pattern? You've probably heard this a dozen times already but stocks have reversed sharply on short covering thanks to bullish analyst comments and some wildly positive earnings surprises. The short-term trend is up and money managers are racing to catch up again, especially if they were caught short.

Now the S&P 500 is running toward major resistance at 950. Will it breakout? No one knows but odds are good we'll test that level. More importantly there has been a change in tone. The better than expected earnings results have inspired a little enthusiasm for stocks. Granted we've only seen the first week and we still have over 80% of the S&P 500 earnings announcements to go. Investor sentiment could change just as fast if the results and the guidance start to disappoint.

We're adding three new stocks to the watch list and all three report earnings this week. Odds are good we could be triggered on some post-earnings volatility.