Positive signals and pleasant surprises

In past weeks we have experienced somewhat positive signals from the macroeconomic data released in the US.
There has been some pleasant surprises that have helped support the optimistic sentiment currently prevailing in the stock markets, such as the better-than-expected readings from the US trade deficit, suggesting that the recent improvement in the trade gap has had a positive effect on growth in the gross domestic product.
In addition, Americans' spending kept growing at a healthy pace in March and February, and the latest government data on retail sales showed consumers are still confident about the economy.
In the weeks to come, investors will be looking for guidance in the coming corporate earnings of the US. Already last week some of the Blue Chips, or large capitalization stocks, announced their first quarter earnings results for 2007.

Upbeat earnings
Luckily the earnings were upbeat and the majority of investors felt comfortable buying into the equity markets. The overall earnings reporting period is expected to be pretty weak.
The earnings growth from big US companies for the first quarter is currently forecasted to be lower than other quarters in the past.
Many analysts predict that markets will be benefited regardless, since companies will not have a difficult time impressing investors as the expectations of earnings are so low anyway.
The most bullish investors believe that there is plenty of cash in the sidelines that will be invested in the markets during the next week of earnings season, unless there is really much lower corporate earnings than forecasted.
Other less optimistic economists believe the market will be highly volatile during the earning season and will move sideways, guiding itself solely on results from individual earnings reports.
The BUX, index of the Budapest Stock Exchange (BSE), hit its 12-month this week as it reached beyond 25,100 points on Monday.
The BSE continues to be positively favored by the optimism currently prevailing in the global equity markets, as the US recuperates from its equity looses of February and March, and investors continue pouring cash into emerging markets such as BSE. The big winners for last week in the BSE were MOL, the oil and gas refinery, and OTP, the largest Hungarian bank.
Oil stock MOL gained more than 5% last week. Monday it went through the psychological level of Ft23,000, which is an important resistance level.
OTP Bank gained close to 4%. The Hungarian bank stock reached the psychological level of Ft9,000.
When the stocks reach psychological levels or resistance levels many prearranged stop sell orders are triggered. Investors use a "sell stop" hoping to gain momentum if the price reaches a particular price.
If it exceeds the level indicated (Ft9,000 for OTP or Ft23,000 for MOL), it will automatically trigger a market order and will be executed at the best price immediately obtainable. When so many "stop sell orders" are triggered it pushes the price of the stock lower on heavier temporary selling pressure. That is the reason that stocks have a difficult time overcoming the resistance or psychological levels. I expect optimism to continue to prevail in the global equity markets as investors already expect lower corporate earnings.
In the coming weeks, everyone will be looking for guidance in the coming corporate earnings announcements and other macroeconomic data that could move the markets upward.
In terms of Hungarian stocks, I think MOL and OTP will continue recording gains. Watch for prices of oil as they will determine the movement of MOL's stock. On the other hand, OTP might be further favored by the amicable sentiment on global stock exchanges.