Real Story: Earnings, M&A and Housing Drama

John Bollinger says the market looks good as earnings season starts amid more drama in housing, biotech and M&A.
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At the onset of first-quarter earnings season, the market is technically strong, John Bollinger of Bollinger Capital Management tells Aaron Task on Tuesday's

The Real Story podcast.

"The market looks pretty good in terms of its basic structure -- major averages are approaching new highs -- and we have strong technical support," Bollinger says.

The underlying story is there has been a "long string of better-than-expected economic reports, which creates a positive psychological tone," according to the veteran technician. "People have consistently underestimated the stock market and the economy,

and so a rapid-fire decline meets support, because

the decline is met by better-than-expected news."

In terms of sectors, "energy is looking very constructive," heading into earnings season, Bollinger says. "We expect the same for energy as for most

sectors: on balance, earnings will be better than expected and contribute to a rally to solidify new highs" for major averages.

That said, technology is "more problematic," and the

Nasdaq Composite

is in the "least good shape" of the major averages, he says on a day in which

Seagate Technology

(STX) - Get Report

became the latest tech leader to warn of weaker-than-expected results.

Other stocks in the "Geoff Tate Zone" Tuesday included

Marathon Oil

(MRO) - Get Report

and

Jackson Hewitt

(JTX)

.

Task's second guest,

TheStreet.com

real estate reporter Nick Yulico, discusses the dismal results from

DR Horton

(DHI) - Get Report

, which reported that fiscal second-quarter new-home orders fell 37% from a year ago.

"The situation Horton is facing is homebuilders are aggressively cutting prices because they bought way too much land, spent too much on it and now have to get rid of it," Yulico says. "That means more impairments" or write-downs of the land value are coming. (Yulico and Task discussed the implications of what the write-downs mean for homebuilders' book value in an accompanying video for TheStreet.com TV, which can be found

here .)

MDC Holdings

(MDC) - Get Report

has "cleared out a lot of higher-priced land" and thus seems to be in better shape on that front vs. competitors, says Yulico. Meanwhile,

Toll Brothers

(TOL) - Get Report

is exposed to high-end consumers who appear to be holding up better than low- and middle-income Americans.

Still, all the builders face a macro environment where "lending is getting tighter and the jobs report last week means we now may not have a rate cut," he says. "What fueled the boom was loose lending and low interest rates -- it doesn't look good" for builders on either front.

Outside of housing, Task discussed the day's corporate news, including

ImClone's

(IMCL)

announcement that its study of Erbitux in pancreatic cancer failed. He also discussed M&A activity involving

United Rentals

(URI) - Get Report

,

Cemex

(CX) - Get Report

and

BCE

(BCE) - Get Report

.

In the remainder of the podcast, Task discussed the implications of dollar weakness and provided some speculative suggestions for listeners participating in

TheStreet.com's

"Beat the Street" contest, a fantasy trading game.

Click

here to listen to the entire podcast.