Earnings Season To Confirm Or Deny Market Gains?

By Friday’s close the bulls were back on top, cheering recent action in both the S&P and Dow; it was their best week in a year.

Now investors are focused on the start of earnings season, which kicks off Monday after the bell with Alcoa earnings. Analysts predict the market will see another solid quarter of corporate results.

However, the guidance and tone of the outlook presented by Corporate America will be more likely to move the broad market than profits. And, the low volume and volatility, recently, suggests many investors are skeptical and still harbor doubts about the future.

We will likely see even more volatility next week, says Stephen Massocca, managing director at Wedbush Morgan. Although the numbers that the companies report may be good, the guidance that they give may not be.

Ahead of what may be a make or break period for the market; the S&P 500 closed up 5.4% percent for the week, the Dow rose 5.3% and the Nasdaq advanced 5% for the week.

How should you position now?

Instant Insights with the Fast Money traders

I’m biased to the sell side, says Guy Adami. I don’t think we saw the bottom last week, not by a long shot.

I can’t buy into the market rally either, says Steve Grasso. I think the market will go higher in the short-term but ultimately I expect we’re going lower. I don’t think the lows are in for the year. The smart money is short.

I expect the bulls to dominate, counters Joe Terranova.

It appears that momentum has changed from negative to positive. For example, Treasuries are weaker and yield on the 10-year jumped higher. Crude oil and copper are also higher for the week.

If you’re looking for a trade, I think the play is the mean reversion trade; that is I expect underperformers or laggards to play catch up as the market powers higher.

But the volumes were so light, counters Mike Khouw. It’s hard to get on board with the rally when trading was so thin.

I also find it hard to ignore the fact that the market has moved so much higher on extremely light volume, echoes Patty Edwards.

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COMMODITY STOCKS UP AGAIN TO CLOSE OUT WEEK

Commodities rallied in tandem with the stock market this week; copper and oil both closed with strong weekly gains.

How should you trade?

Commodity names were due for a bounce and they got one, says Guy Adami. But I’m watching the action in Freeport as the poster child for commodities. Since the beginning of April the stock has been making lower highs and lower lows, he says. If the stock can close above $70 I’d feel bullish but otherwise the technical suggests it wants to move lower - and that is likely a barometer for metals, broadly.

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TOPPING THE TAPE: ANADARKO

Anadarko topped the tape Friday with the stock experiencing sharp gains; the move comes in the wake of word Anadarko management notified BP it will withhold reimbursement on cleanup costs.

What should you make of it?

I see some interest in Anadarko among my clients, reveals Steve Grasso. And I’m still seeing investors interested in Occidental as well as Exxon .

I think Anadarko has more upside, speculates Joe Terranova. However, since the stock has gained about 20% in 5 days, I’m only a buyer on a pullback.

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Trader disclosure: On July 9, 2010, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Adami owns (AGU), (BTU), (NUE), (C), (GS), (INTC), (MSFT); Adami’s wife works at Merck; Terranova owns (GOOG), (AMZN), (MON), (APC),(GMCR), (MYL), (MRVL), (BAC), (ADI), (ADBE), (AKAM), (HES), (CVS), (AXP), (EMC), (ABT); Grasso owns (ASTM), (ABK), (BAC), (BGP), (C), (CSCO), (DYN), (JPM), (LPX), (MO), (NDAQ), (PFE), (PRST)

For Joe Terranova
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Michael Block
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Neil Currie
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