The End of Earnings Growth … Is the Correction Over? Probably not.

San FRANCISCO (MarketWatch) - "With less than 5% of the S&P 500 Index left to report earnings, the third quarter is looking more and more like the end of the road for nearly three years of earnings growth...Third-quarter earnings represents a turning point in corporate results, said Howard Silverblatt, senior index analyst at S&P Dow Jones Indices..."Q3 looks like the start of a decline," Silverblatt said, adding that in a down economy, quarter-over-quarter trends provide a more accurate picture of corporate health than year-over-year figures.
"We're definitely looking at Q4 as the beginning of a continued downturn," he said.
Full story at...
http://www.marketwatch.com/story/multiyear-earnings-win-streak-likely-to-end-2012-11-19

IS THE CORRECTION OVER?
That question can depend on news and technicals.  To identify a correction bottom based on technicals, it is necessary to analyze price, volume and market internals.  On Friday of last week (16 Nov) the market was up 2% on high volume and acted as if the previous day was a technical-bottom.  Given Friday's action, I looked at Thursday. 

Thursday was not a technical bottom; thus the bounce Friday and Monday was news-driven and probably resulted from conciliatory comments made by the Politicos regarding the Fiscal Cliff.  Actually, that seems pretty obvious. 
 
The real question follows: Is the bounce sustainable? i.e., will the markets continue up?  The answer depends on whether all of the causes of the market fall have been resolved by the “good news”.  The answer is, “Probably not.” 

There is still plenty to worry about (world-wide recession; US recession; Middle East war; maybe the Fiscal Cliff won't be resolved easily; maybe the Fiscal Cliff fix will be so small that it will worry the markets; lack of earnings growth.  You get the idea...there's plenty to worry about. 

Bottom line: I am going to wait for some further technical indication (based on number crunching) that this correction is over.  Till then, I remain a Bear. 

MARKET RECAP                                                                               
Tuesday the S&P 500 was basically unchanged, up a point, to 1388 (rounded).  VIX fell 1% to 15.08.  

NTSM

The NTSM analysis remained SELL Tuesday due to Price and Volume indicators.

The market is 45-days past its top.  Last year’s 19% correction only took 50-days top to bottom.  This correction has been slow to develop. 

Sentiment is falling fast and now sits at 43%-bulls.  The buy signal for sentiment is now 33%-bulls.  If sentiment falls that low it would change the sentiment indicator, but it will take more than one indicator to produce a buy for the NTSM system.

MY INVESTED POSITION

Based on the SELL signal, 7 November 2012, I moved out of the stock market at 1377 on the S&P 500.  Because of the extreme negativity I have noted from Hussman and others, I am currently invested in a range of near 15% invested in stocks.  I also took short positions on the morning of the 8^th that make me currently net short the S&P 500.  (I am using Guggenheim (formerly RYDEX) funds and 2x Short ETF, SDS.  Those are dangerously volatile so I don’t recommend them unless you have a BIG tolerance for risk.  Also, if they are held too long they may not perform well.