Where are we now?

The past week had been a highly anticipated one, with Q1 bank earnings in the offing. As you might already know, the banks, namely Goldman Sachs, JP Morgan and more critically, Citigroup have all announced better than expected earnings.

On any other week, this would have caused a larger stock rally than what we have witnessed. The Dow moved higher by just over 100pts or 1.3% on the week to close above 8100 pts.

I guess this was because the market had already more or less prepared itself for the results, which, to the admission of many now, was greatly helped by AIG's unwinding of huge credit positions to the benefit of these banks and lossening of accounting standards on hard to value assets.

Nothing much has fundamentally changed.

Next week we will have BoA announcing Q1 earnings on the 20 Apr, Bank of NY Mellon, US Bancorp and State Street Corp (large investment firm) on the 21 Apr and Wells Fargo on the 22 Apr.

I feel that even if one or two of the banks report poorer than expected earnings, the stock market will take it on its stride as it has already looking beyond these earnings.

Because the recent stock surge was predicated by economic data that proved the US economy is no longer in free fall. Stocks have always been a leading indicator of economic recovery and it is trying to do its job now.

That saying, the next question is whether stocks will go much higher from there or consolidate is a hard call. I feel the latter is more plausible.

Even though economic data have stabilized, but the US is still at a very low level in terms of industrial production, home prices, still rising unemployment and of course is still in the midst of develeraging, which in turn will further pressure asset prices e.g. real estate.

Until these pan out properly over the next few months, I don't expect to see stocks making a marathon higher again.

I might go the way of range trading.