Monday, July 22, 2013

80% of Companies Issue Negative EPS Guidance…so far

“With 21% of the companies in the S&P 500 reporting actual results, the percentage of companies reporting earnings above estimates (72%) is in line with the four-year average, while the percentage of companies reporting revenues above estimates (50%) is below the four-year average.”

“Earnings Growth Rebound Still Projected for 2nd Half 2013, But Little Revenue Growth…At this early stage of the earnings season, 17 companies in the index that have issued [earnings per share] EPS guidance for the third quarter. Fourteen companies have issued negative EPS guidance, while three companies have issued positive EPS guidance.”
Report available from FACTSET at…


"Looking at the rest of the week ahead, it will be a bumper one for U.S. earnings as around 160 S&P 500 constituents are scheduled to report," wrote Deutsche Bank analyst Jim Reid, in a market report. "With U.S. banks now largely out of the way, we should get a clearer picture of how corporate America is performing."  Story at…

“US sales of previously occupied homes dipped in June to 5.08 million, but remain near 3 1/2-year high. Economists polled by Reuters were expecting existing home sales to rise to a seasonally adjusted annual rate of 5.26 million in June from 5.18 million the month before.” Story at…

Jeepers…there must some good news around…Yes there is; the S&P 500 was up!

Monday, the S&P 500 was up 0.2% to 1680 (rounded). 
VIX was down 2% to 12.29.  

As I wrote Friday, the Sell signal in the NTSM system is based on bullish action in the market; high sentiment values; “percent-above-the 200dMA”; and failure to decisively take out the prior high.  Except for that last one, the others are all sentiment related – too much bullishness.  It is important to remember that sometimes excessive bullishness is the correct market call.  That is true after a significant bottom.  It is hard to know if the market will shrug-off the current high sentiment and continue up.  I don’t think so.  I looked back as far as 2009: when conditions were as bullish as today (in sentiment, bullish market action, high %-above the 200dMA) a top occurred shortly thereafter.  The tops were not necessarily “major” tops though, so this suggests another correction to me.  Perhaps the S&P 500 will finally have that 10-20% correction that is overdue.  It is not unusual for the extreme bullishness to last for several days before topping.  Market internals can give us a clue.

I do see signs, today, of a turnaround in market internals that would indicate a turn down in the general markets is likely to follow.  Whether this trend will continue remains to be seen. 

One indicator not confirming a downturn is the VIX.  It is neutral in my system and has fallen to near 12.  VIX was around 10 before the 2008-09 crash.  If the options boys expected a correction VIX should be rising.   

Monday, the overall NTSM analysis remained SELL at the close. 

I remain about 20% invested in stocks as of 5 March (S&P 500 -1540).  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.