"Why is the market telling me it's conflicted?"
My Take: Shares of Alcoa (AA - Get Report) have charted an interesting path since the company's July 9 earnings report. The stock fell July 10, bottomed July 25, rose 23% from that point till Sept. 14 and has since shed 8%. Beginning Sept. 14, Alcoa shares have lagged the iShares MSCI Emerging Markets Index (EEM), which is important, since Alcoa still sounded fairly bullish on emerging markets back in the second quarter. The stock has also lagged the SPDR S&P 500 (SPY) and the SPDR Dow Jones Industrial Average ETF (DIA).
On Oct. 3, Alcoa was able to hold the 50-day moving average on decent volume. Still -- and not to be a Debbie Downer -- take notice of these facts. Transport stocks are issuing earnings warnings while Alcoa's shares have been hanging tough. Meanwhile aluminum-can users Pepsico (PEP - Get Report) and Coca-Cola (KO - Get Report), both with their own emerging-market exposures, have seen shares trade beneath their 50-day moving averages since Sept. 12 and Aug. 22, respectively.
I think the other stocks mentioned here are flashing the yellow caution light that should be coming from Alcoa. The fact that this name is not sending out such signals leaves me hesitant as earnings season commences. I would have arrived more confidently had the market reined it in again last week, but we saw the exact opposite take place, and potentially misguided enthusiasm is running as wild as Hulkamania.The market, in my opinion, requires more than a sea of earnings beats coming in $0.01 above estimates as top-line figures lag below consensus for another quarter. In order to justify what we have witnessed in the past five days, companies will have to exit the gate showing improved revenue results on a sequential basis, as well as stronger bottom-line beats. It's a tall order, no?