It is quite clear that the market wants good reports from the earnings announcements that begin this week. We make that judgment based on Friday’s weak close, despite a solid week of some of best economic news of the year that culminated with the drop in unemployment to 7.8% from the expected 8.2%.

Given the market’s performance over the last month, we feel that investors should consider reducing the more speculative portions of their portfolio.

After two consecutive weeks of more than 200 basis points of growth in S&P 500 market prices, resulting from general enthusiasm over the stimulus decisions of the ECB, Fed, and Japanese Central Bank, the market took profits relatively quietly last week. Last week’s economic reports were generally flat.

The Fed has enacted QE3 with an indefinite time deadline. Europe continues to make progress after Draghi’s bond buying announcement and Chancellor Merkel’s reaffirmation. The market has noticed and responded with a strong upward movement in each of the past two weeks.  

Last week’s events moved the market in a positive direction.  ECB President Draghi did indeed get approval to implement his sterilized bonds to assist weaker European nations from defaulting on their sovereign debt.

Our opinion is that current equity prices are reasonable, if not a tad on the cheap side, unless of course none of the above action items turn out positive for investors. The U.S. economy could probably survive without QE3; however, Draghi’s task is of particular concern. The amount of European sovereign debt held by banks could be disastrous if Greece, Spain, and Italy collapse. A decline in the euro would lead to downward EPS revisions in U.S. equities and place them on an overvalued shelf.

All the right people will be at Jackson Hole late this week conversing about economic stimuli.  Chairman Bernanke will speak Friday, and Mr. Draghi will be on a panel Saturday morning.  But if I were a betting man, and I am, I would bet against any major announcements at the conference.  Most feel that Bernanke will await the various economic releases in September before making a final decision, and Mr.

Last week went very much as expected with the S&P 500 inching along again: It was slightly down Monday and Tuesday and then slightly up each of the last three days to end the week up +1.00%.

Beginning on Monday, August 6, the S&P 500 has turned in daily returns of +0.23%, +0.51%, +0.06%, +0.04%, and -0.13%. The average return has been 0.15% per day. Is this thing even alive?

The VIX (S&P 500 Volatility Index) hit a 52-week low, closing today at 13.70.  The market hath neither fear nor pulse.  In fact, besides 2008, today’s VIX close was the lowest since 4/5/2005, almost before VIX began trading in late 2003.

Last week, neither Fed Chairmen Bernanke nor European Central Bank (ECB) President Draghi committed their respective organizations to a specific solution to the economic woes of the U.S. or Europe. President Draghi’s firm statement last week that “the ECB is ready to do whatever it takes to preserve the Euro” lacked substance. Yet, that statement sent the S&P 500 roaring up +3.56% over July 26 and 27.