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Technicals vs Fundamentals Now

Alcoakicks off earnings season tonight. How are stocks positioned on a technical and fundamental level?

On a technical level, stocks were overbought going into the New Year, but more than a week of grinding sideways is helping correct that.

Fundamentally, we still look in good shape: the S&P 500 is trading at about 13.5 times 2011 earnings. Average earnings estimate for the S&P 500 is about $93. At an average multiple of 15, that leaves room for the S&P to move to about 1,400, a roughly 10 percent move. Not surprisingly, that is exactly where many strategists have their price target: about 1,400.

Big merger in utilities with Duke buying Progress Energy . Why are utilities not reacting? It has to do with why they are merging. The meager premium (4 percent) is a tip-off. Simply put: Duke can't get any notable earning growth; the way you get it with utllities is merge and realize synergies.

Mergers based mostly on cost savings — and only modest growth — might work, but it hardly generates enthusiasm. And remember: these are regulated utilities; synergies may not necessarily work the same way.

Will it spawn a wave of mergers? Maybe; but again, remember, these are monopolies.

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