Watching the Dollar Again..

7:30 am EST The dollar is weakening again this morning. Therefore the futures are strengthening. This has been the theme for the last several weeks as I have mentioned several times. There has been increasing talk questioning the global recovery recently. The people behind this are starting to move away from risky assets (stocks, commodities) and into "riskless" (dollar, treasuries) assets. As this happens, the dollar strengthens and the equity markets weaken.

While the short term trend in the market is lower for now, I am still heavily in cash going into earnings season. Alcoa (AA) reports tomorrow afternoon. Of course, it will be a loss. They may be the worst managed company in the Dow. They couldn't make a profit when the price of aluminum was at a record. They are not going to make a profit now. The key is going to be the reaction to the loss they are going to report. Either way, the company isn't (and never is) a buy. I have other places to put my money.

What you want to look for in this coming earnings season is where the analysts rate the stocks (buy, hold, sell). We are getting back to the times when, for whatever reason, the analysts will be moving stocks for a while. Upgrades move stocks up and vice versa. So for good long earnings trades, you want a company that will beat the numbers and has an overall negative rating from analysts. An earnings beat and a couple of upgrades from analysts will make for a winner on the long side. The same is true for shorts, if everyone is at a buy and you see a miss coming, it will be an easy short trade. As always, you want to use options for trades like this. There is no reason to risk a huge amount of capital on an earnings play. Small amounts of capital and 100%+ returns will add a little juice to your portfolio. I will give some trades as they come up. Until next time, stay low risk..