Monday, April 29, 2013

Earnings Up – Revenue Down

While reported earnings this quarter have been in line with the prior four years average, revenues have been falling.  As FACTSET noted:
“…only 44% of S&P 500 companies have reported revenues above the mean estimate to date. This percentage is below the average of 57% over the past four years. As a result, the revenue growth rate has declined to -0.6% today from 0.4% at the end of March and 0.9% at the start of the quarter. If the final revenue growth rate for the quarter is -0.6%, it will mark the second time in the past three quarters that the S&P 500 will have reported an aggregate year-over-year decline in revenues.

It is interesting to note that the market does not seem to be reacting negatively to the unusually high percentage of companies reporting revenue below analyst expectations and the falling revenue growth rate for the quarter.” [My emphasis]
Full report from FACTSET at…

My cmt: No the markets aren’t reacting.  I think the lack of market reaction in the indices is unusual, as does FACTSET, but it can’t last forever.   

For the quarter, Europe's results were dampened by ongoing economic uncertainty. First quarter comparable sales were down 1.1%...” –McDonald’s Corp. (Apr. 19)

“We planned for Europe to be similar to 2012, down again, but it was even weaker than we had expected.” –General Electric (Apr. 19)
Full report from FACTSET at…

“In Asia/Pacific, Middle East and Africa (APMEA), first quarter comparable sales declined 3.3% primarily due to ongoing weakness in Japan and negative results in China.” –McDonald’s Corp. (Apr. 19)
Full report from FACTSET at…

DR. COPPER (from a trader board)
“Dr. Copper has a better forecasting record than most prognosticators, and it thinks the outlook is terrible. A head and shoulders pattern, shown on the weekly chart, projects down to $1.70-2.00 from current level of $3.10 area. If it happens, everything else will be in crisis mode similar to 2008.”

Monday, the S&P 500 was up 0.7% to 1,594 (rounded). That's a new high for the S&P 500.
VIX was up 0.7% to  13.71.

The S&P 500 is 9% above its 200-dMA at today’s close.  I don’t expect it to get too much higher than 10% above that level.

Volume was down about 20% today compared to the month’s data.  You might say there was little conviction at today’s top; or you might say, since Japan and China exchanges were closed today, then Japan and China must account for 20% of the daily NYSE volume.  That might give a clue why the market has been going up in the face of declining economic data.  With currencies declining vs. the dollar, foreigners can hedge their currency decline by investing in the S&P 500.

Monday, the NTSM analysis was again at HOLD at the close.  All indicators are now neutral. 

A statistically significant day (about a 1% climb in the S&P 500) will signal a top to me.  I am guessing the top will be when the S&P 500 climbs another couple of percent higher. 

I remain about 20% invested in stocks as of 5 March (S&P 500 -1540).  My reasoning may be found at…

The NTSM system sold at 1575 on 16 April.  (This is just another reminder that I should follow the NTSM analysis and not act emotionally – I am under-performing my own system by about 2%!)

I have no problems leaving 20% or 30% invested.  If the market is cut in half (worst case) I’d only lose 10%-15% of my investments.  It also hedges the bet if I am wrong since I will have some invested if the market goes up.  No system is perfect.