Yep, I've got the usual technical read for you today, but at this point I think we have enough information to also talk about the 800 pound gorilla in the room... Q2 earnings. I want to touch on both very briefly though, because I want to devote most of today's time and space to telling you about the new trading (though maybe I should say 'investing' in this instance) suggestion we told you about in Tuesday's newsletter. First things first - the market. As you certainly know by now, it's up pretty firmly today, higher by 0.6% as I write this on the heels of good news from Intel, Hewlett-Packard, and Boeing. None of this really changes anything for us though. Remember, yesterday we pointed out to you how we've come to expect higher highs and higher lows based on the pattern we've seen since the early-June reversal. Well, even with today's bounce we've yet to make a higher high, or even test the key resistance level around 2980 for the NASDAQ Composite. Though there's likely enough gas in the tank to get us that far, I'm not going to be impressed until the composite can actually get above - and stay above - the 2980 mark. Until that happens, I still have to expect the same basis up-and-down stuff we've seen so far... though at least it's net-bullish stuff. The trouble is, if there was ever a recipe for erraticness and unpredictability, the current situation is it. Summer's a slow time (low volume) for trading anyway, and that problem was exacerbated this year by what was perceived as a global economic slowdown. Add in the fact that earnings so far have been lackluster/disappointing, and what you have is a bunch of investors losing interest altogether. On the earnings front, 32 of the S&P 500's companies have shard last quarter's numbers. And so far, net earnings have been flat compared to last year's Q2 results. Only about 55% of reporting companies have topped estimates, versus the norm of 70%. I know there are still about 470 major corporations that have yet to post results, and they could start to paint a brighter picture again. Thirty companies isn't exactly a small number though, and the tally so far is still telling. If for some reason the remaining 470 of the S&P 500's stocks don't collectively post growing numbers, it's going to be the first time since 2009 that the S&P 500 falls short of its overall earnings estimate, which for Q2 is $24.94. For reference, the S&P 500 'earned' $24.86 in the second quarter of 2011, meaning a mere shortfall of 0.3% could lead us to a psychologically devastating decline in year-over-year quarterly earnings.... also the first since 2009. (Never even mind the fact that the second quarter's original EPS estimate has fallen from the mid-2011 guess of $27.61 to the current $24.94.) Not that one quarter makes or breaks a bull market, but all big trends start out as small ones. I'll put it like this - Q2's numbers have my attention. Don't get me wrong. I'm still bullish overall. Like I told you a couple of days ago, too many people are expecting the world's economy to slip into a recession for it to actually happen now. I know that sounds crazy, but that's how the vast majority of recessions start... when the masses don't see it coming. It never hurts to have this kind of bigger-picture perspective though. In tomorrow's edition I'm going to (try to) break down earnings results by sector, as I think that's as valuable as getting a handle on the overall earnings situation. Right now though, today's main event.... A 'Super' Idea As promised yesterday, we've got a new trading idea for you today. Just for a little fun though, see if you can figure out which stock I'm talking about before I actually tell you what it is. This company makes supercomputers. These computers aren't just high-end versions of Dell or Hewlett-Packard machines you and I are most likely using right now. In fact, unless you work for a government agency, a university, or a huge company that has to manage truckloads of data, odds are you've never even used or seen a computer of this type - they're huge, and they're not exactly the kind of device you use to check your Facebook page with. These computers are good for pattern matching, complex searches, scenario development, behavioral prediction, and anomaly identification within terabytes of digital data, however. Yeah, it may be boring from a regular consumer's point of view. The kind of money big organizations are willing to pay for these computers, though, is anything but boring. Check out some of the recent (as in the past two months) deals: $12 million contract to provide a supercomputer to a Finnish IT company $40 million contract with the National Energy Research Center $16 million contract from the Department of Defense Boeing also tapped this company to figure out how to make its plane designs more efficient. General Electric bought one of its computers for its technology development arm last year. You get the idea - when the company does a deal, it's a big deal. Got it figured out? Our new suggestion is Cray Inc. (CRAY), the premier name in supercomputers. While the big-ticket business model makes things exciting, veteran investors will also recognize the potential pitfall: it's pretty much an all-or nothing business. Where one bad quarter for Dell or HP might mean a 10% dip in computer sales, one bad quarter for Cray could mean a 50% plunge in computer sales. That's changing though, which is why we think Cray Inc. is in that proverbial sweet spot right now... at the onset of a new and smarter business mindset, but before the rest of the market 'gets it'. Just for perspective, in 2008, 80% of Cray's revenue stemmed from government customers. That's great as long as those agencies continue to have deep pockets, but let's face it - the willy nilly government spending of yesteryear isn't guaranteed to be the case going forward. That's why Cray has been diversifying not only its customer base, but also its product base. And, it's working. Last year, only about 50% of its revenue came from government agencies. The rest came from schools and private corporations. The next step in the diversification process will happen (and is happening) on the product front. By and large, Cray was founded and developed on a big-ticket foundation. The company's figured out what a roller coaster ride that can be though. To help stave off some of that volatility, Cray sold Intel some of its intellectual property ... the 'interconnect' patents for supercomputers, to be specific. But, the deal may actually establish a bigger opportunity through Intel than Cray could create for itself, by itself. [Let's be honest - Intel is a name that open doors Cray may not be able to open on its own.] And, one has to wonder if the interconnects and partnership with Intel could be a stepping stone for Cray into cloud computing... an industry that's still growing like crazy, and putting heavy demands on hardware providers. Said more directly, the Intel deal may further smooth out the revenue stream. It'll be a nice addition to the strong margins Cray's already generating from its big-ticket items... the best of both worlds. And make no mistake - when Cray hits the ball, it's a homerun. Though the bottom line is still a little volatile, the company has topped estimates in each of the past six quarters. It's also topped estimates in eleven of the past thirteen quarters. Better still, earnings are expected to grow by more than 50% this year, now that high-end computer spending is back on firmer footing. [Again, Cray inked $68 million worth of contracts in the last two months alone, versus a total of $236 million last year. For 2012, the pros expect a whopping top line of $440 million.] Yeah, I know a P/E of 22.4 feels like a lot to pay for a stock. In this case though, with a likely 50% growth in earnings and a forward-looking P/E of 18.5, it's not a bad price for long-termers. For what it's worth - though this has no bearing on our bullishness - Needham recently upped its target price on CRAY from $12.00 to $14.00. That's still below the current average target price of $14.50. Frankly though, I don't even think that target is optimistic enough. Like I said on Tuesday, this isn't a "you absolutely gotta have it right now" kind of idea. Though I wouldn't wait too long if you're interested, I do think you can afford to at least wait on a small pullback or short-term lull to step into this long-term idea. OK, I've said enough - either you like it or you don't. If you do have an opinion (from either side of the fence) you'd like to voice though, you can do that at CRAY's research page at the SCN website. We love seeing you guys chime in about our Featured Stocks. Oh, and don't forget we've got another trading idea coming your way tomorrow. You may want to keep some of your powder dry for that one.