The earnings season is about to conclude and as we mentioned earlier, we expected corporate earnings to be a little better than expected. We were spot on and those better than expected numbers helped lift the S & P another 4.3%. Most analysts believe that there will be a small correction and we won’t argue there. While this has not been one of your super bull markets that defy explanations, the markets have been robust and it’s usually a longer term positive if we have some sort of retrenchment.

We aren’t expecting any major moves in either directions and we will stick with our initial assessment: A slight pullback and new highs will be reached before the end of the 1st quarter. There will not be a major move in the averages in either direction for several months and any opportunity to buy individual stocks at lower levels might be warranted.
Short term, we see a 5% rise from this level if the rally continues. Downside risk might be in the 5-10% neighborhood.

Not much in the way of earnings this week. WalMart (WMT) and Hewlett Packard (HPQ) are two prominent names.

Short week and not a tremendous amount of data. Housing Market Index comes out on Tuesday and probably will remain in a stalled pattern as the supply and demand start to stabilize.

Most people will be watching for the FOMC meeting minutes. The signals here should help the equity markets to keep a soft momentum to the upside. The Fed most likely will keep aggressively buying assets. While the Governors have been slightly divided on the issue, the Fed keeps to its plan and continues to pump money into the system. We do believe that this program will end within the next few months and the economy will be “on its own.”

On Thursday, Jobless Claims and CPI. Nothing surprising there. However, we do see inflation rearing its ugly head in the second quarter. More so than in the last few years and this is where the Fed will start to come under some additional pressure.

As we have stated before, we do feel that it might actually be healthy for the US Economy if there is some inflationary pressure.
Normally we don’t comment on any individual investor’s opinion. The market’s opinion is all that matters but this week we will comment on two very prominent people.

Warren Buffet and Ray Dalio.

First, Warren Buffet. His purchase of H.J.Heinz (HNZ) deserves a mention. Normally Berkshire Hathaway(Buffet’s investment vehicle) buys companies that are solid, profitable and most importantly cheap.
Heinz was not cheap. It was trading at 52-week highs and he paid a premium over that price to acquire it.

We think this says two things, that Buffet believes that the market is going much higher long term and that there are other candidates ripe for his investment.

This will be a game for traders for months and bears watching.
Second, Ray Dalio. Dalio runs one of the largest hedge funds in the World and is a certified genius in our mind. His quirky behavior aside, he has had an impressive run in building his clients wealth and when he speaks we always listen.

He came out on a call to clients that he and his people believe that stocks still have a ways to go and that he is investing heavily again in equities.
As much as we agree with his assessment of stock valuations we also know someone as smart as Ray Dalio isn’t just getting back into the equities game. We firmly believe that his investment vehicle, Bridgewater Associates LP has already done their investing and he is just sharing his opinion with us now, after the fact.

In 33 years in the business we have never seen a major investor state what his intentions are before he does them, it’s usually after he is done. That’s when we know.
All in all though no matter what either man is up to, it’s a positive for the equity markets and we will take that any day of the week.