Welcome back to the grind everybody. Hope you all had a good weekend, and I hope everybody got the trading week started on the right foot. Anyway (and as always) I've got something to say about the market after factoring in today's action, but can I point a couple of things out first? This morning, Bryan Murphy made a great point about investors habitually choosing between toy companies Mattel (MAT) or Hasbro (HAS) as a cyclical holding for their portfolios, but a general unwillingness to hold two toy names in a portfolio. Ergo, the never-ending question is, which one do you hold? Answer: It depends. Bryan takes a good close look at both names, and picks the best prospect for right now. The other entry at the site I strongly suggest you take a look at is John Udovich's look at Flextronics (FLEX), which if I recall correctly is also a stock the SmallCap Network Elite Opportunity owns (but don't let 'em know I told you that). John gives us five reasons why he likes it, which are presumably the same reasons the SCN EO likes it. Either way, if you're looking for something to fill a hole in your portfolio, FLEX may well be it. All that being said, while Udovich likes Flextronics and Brumley likes, well, one of the toymakers, I don't think you or me are under any illusion that the stocks we talk about here in the newsletter are enough to constitute a complete 'solution'. If you want picks - enough to fill a whole portfolio - complete with entries and exits and all the analysis that should be going on in between, then there's just no substitute for the SmallCap Network Elite Opportunity. Today's newsletter reminded me of something about the current market environment that I think bears repeating to you now. The SmallCap Network Elite Opportunity's lead analyst John Monroe penned today "I want to reiterate, with the markets exercising a high degree of volatility of late, I would not suggest entering into any short positions on new lows or be getting aggressive to the long side on any new short-term rallies. Actually, we're suggesting quite the opposite by continuing to play contrarian for now." I hadn't really thought about it much (which is odd considering I'm a contrarian at heart), but he's spot-on.... the smart-money move of late has been betting against a trend right when it looks like it's starting to look like a sure thing. In other words, the market's been dropping just when it looks like it's ready to roll higher, and it rallies just when it seems like it's about to break down. These guys have navigated that reality with near-perfection since it began back in mid-March, and it's pretty clear to me they know exactly where and how stocks are going to make their next mega-move. If you're not entirely sure what to do next with stocks, the SCN EO can help you out. Learn more about it here. Or, copy and paste the following link in your browser: http://www.smallcapnetwork.com/?vmpd_ckstr[click_track]=SCN+Newsletter&vmpd_ckstr_redirect=/pages/SCNEO/v1/ Earnings: One Week In, and Already Ugly Yes, Standard & Poor's did update their data this weekend, so I will be able to give you the first of this earnings season's report card.... although you may not want to hear it. With 104 of the S&P 500 companies having reported last quarter's results, 104 (67%) have topped estimates, 23 (22%) missed, and 11 (10%) of these companies met estimates. That's actually about the average. That's not the scary part though. Remember how I told you the original Q1 earnings forecast of $25.49 (for the S&P 500) was likely to be too optimistic? Well, as of the end of last week, that forecast has been ratcheted down to $25.40. Rather than earnings growth of 5.1%, now the market's Q1 earnings growth rate is on pace to be only 4.8%. No, it's not the end of the world, but it's not the end of earnings season either. At our current rate of lowered estimates, the S&P 500 may end up pocketing a mere $25.00 per share this time around. That's only a 3.1% growth rate, which still isn't 'bad', but traders may not take to kindly to disappointment of any kind - especially after a 12% runup since the beginning of the year. After more than a year of no real growth, the market's getting restless. There's another red flag waving now that we haven't talked about at all yet, and that's revenue. It's off. Big-time. So far for Q1, the S&P 500's companies' top lines have been pretty disappointing. Caterpillar (CAT) sales fell short of expectations this morning. We told you in Friday's newsletter that IBM's (IBM) sales were weak last quarter. eBay (EBAY) failed to meet estimates for last quarter too. Baker Hughes (BHI) fell short of its revenue forecasts. Google (GOOG) and Microsoft (MSFT) also missed sales estimates for Q1. Not good. We'll update the numbers as more become available; there aren't enough yet to come to any hard conclusions. From what we see so far though, this isn't shaping up as a great earnings season. Stocks Didn't Clear the Hurdle Short and sweet today about the overall market, since you probably already know stocks made progress today. The market gained nearly half of a percent, following through on Friday's bounce. Before you get too excited though, know that the S&P 500 didn't make it above the pivotal 20-day moving average line after testing it late in the day. Neither did the Dow. Neither did the NASDAQ. In fact, the pullback in the last 15 minutes of today's trading is going to start us off on the wrong foot Tuesday morning. The volume behind today's rally wasn't all that great either. It's still too soon to say the market won't move higher from here. But, this isn't a convincing step in that direction. And, even if it doesn't immediately pull back from here, there's still a thick ceiling of resistance above where we are now. For the S&P 500, that ceiling's around 1591. That's it for now. This is a work in progress so we'll need to check in again tomorrow.