Market Brief: Monday, August 16, 2010

There is an amazing safety net being provided by valuation and the earnings trends. It is telling us that the next six months of economic news will be much better than today's headlines, as there is a lot of evidence that the stimulus currently being given, will produce results in coming weeks. Second quarter earnings season is shaping up as a very strong one. So far, 86.6% of firms have reported (433), and 75.1% of all firms beat expectations, while total net income is up 42.3%.

The rate at which insiders are picking up stock resembles the kind of buying interest we have seen in much sharper market declines. While technically, the Head-and-Shoulders pattern on the S&P Mid-Cap Index says there is not much more risk here, and there is big potential over the next few years, when the upside gets back in gear.

Don Hays