Sozzi's Day Ahead: What Mr. Market Has Told Me

1. FedEx (FDX) dropped its worldwide growth forecast, but I was left wondering if the market believes this is enough. Despite a world of mega cost cuts, the stock didn't zoom on an event that was very hyped

2. Wal-Mart (WMT), under the radar, downwardly revised its expectations in key international markets and joined the list of companies calling out Japan -- you know, they do matter -- as a new source of risk.

So, I ask: After hearing these comments, do I pick up some Whirlpool (WHR) on a pullback on the assumption that the U.S. housing recovery will offset (throwback: decouple) the economic storms continuing to brew overseas? Come on, guys, let's take a hard look in the mirror -- a mirror not covered in steam from the shower.

Honest Abe's Early-Innings Earnings-Season Lesson List

I'm totally all for buying a stock -- when I can remove a couple of these talking points from the Honest Abe list.

• View with skepticism the opinion that China's economic growth will reaccelerate in the fourth quarter. The reads I am receiving is that China is becoming worse, and there is no benefit in consumer demand or business demand from infrastructure projects or liquidity injections.
• If you could find a "Yum-Yum" stock, by all means grip it and rip it. Yum! Brands (YUM) had a bunch of intangibles that converged that propelled its stock price, including concerns on McDonalds's (MCD) hurting sector sentiment and uber worries on food inflation. To be a "Yum Yum" stock, the company has to have unjustified skepticism on its fundamentals derived from clear (emphasis on clear) sales and leverage catalysts.
• The dot-connecting is largely skewed toward avoiding potential disasters, rather than unearthing opportunities. By this I mean that the commentary has been so poor, and earnings downgrades so alarming, that the search is on to exit companies that will trumpet these same tunes, as opposed to buying companies that may be doing decently.
• Yum! Brands is the early outlier; earnings news is being sold.
• Not one company I know of has mentioned anything related to the latest Federal Reserve efforts, but they've definitely intensified the rhetoric on the fiscal cliff -- most notably in Wal-Mart.
• You will lose money earned in the summer rally if you fail to think on a granular level with regard to China. If growth is slowing, there is a big chance a company you own is not pushing through price increases, is discounting more merchandise, and is not moving as much product at cheaper prices as it hopes. This triggers a chain of events that impacts near- to medium-term operational performance. A good example is why a company like Caterpillar (CAT) would be cutting production -- its inventory is not in line to demand trends, and that inventory has to be worked down.

Honest Abe Also Says: If earnings season is "priced into" the market, the SPDR S&P 500 (SPY) will land buying near the key support level that is poised for a test. Watch it.

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