Tuesday, September 3, 2013

ISM…China PMI…Second Quarter Earnings...Correction Continues (my take)

“The ISM Index for August improved to 55.7 from 55.4 in July. That was better than expected as the Briefing.com consensus estimate called for a modest decline to 53.4. This is encouraging news insomuch as it relates to the outlook for the manufacturing sector, yet some detail below the headline print indicates manufacturers are no more than cautiously optimistic.”  Full story at…

“The purchasing managers' index (PMI) figure, published by the National Bureau of Statistics, rose to 51.0 in August from 50.3 in July, the highest level since last April and ahead of market expectations of 50.6 in a Reuters poll…”We are seeing clearer signs of economic conditions improving," said Haibin Zhu, chief China economist at JP Morgan in Hong Kong.”  Full story at..

“…Earnings Scorecard: Of the 493 companies that have reported earnings to date for Q2 2013, 72% have reported earnings above the mean estimate and 53% have reported revenues above the mean estimate…
…Earnings Guidance: For Q3 2013, 85 companies have issued negative EPS guidance and 19 companies have issued positive EPS guidance…
…In aggregate, companies reported earnings that were 2.4% above expectations. This surprise percentage was below the average over the past year (4.3%) and below the average over the last four years (7.0%). In fact, it marked the lowest surprise percentage for a quarter since Q4 2008 (-62%)…
…The blended earnings growth rate for the index for Q2 2013 is 2.1%. While the second quarter marked the third consecutive quarter of earnings growth for the index after reporting an earnings decline in Q3 2011, it also reflected the third-lowest earnings growth for the index in the past four years.”  Extensive report available from Factset at…

While the bottom line for S&P 500 companies exceeded muted expectations, guidance was decidedly negative, threatening to spoil a second half that some had anticipated to represent a turning point for the economy…. said Nick Raich, CEO of the Earnings Scout…"By no means are we suggesting this has been a disastrous earnings season. However, it is no longer a very good one, either…The bad news is that we believe a near-term correction in equity prices is justified by the recent decelerating earnings and economic trends"….  Story from CNBC at… 

RECESSION? DON’T BET ON IT. (Virginian Pilot Online)
“The port of Hampton Roads set a single-month record in July for the number of cargo containers moved, the Virginia Port Authority announced Friday.  Hampton Roads moved 205,137 standard 20-foot units, or TEUs, a 13.7 percent increase from July 2012.”  Story at…

Monday, the S&P was up 0.4% to 1640 (rounded) at the close.  (The S&P 500 had been up over 1% until Boehner said he supported striking Syria.)
VIX was down 2% to 16.61.

The 10-day moving average of stocks advancing on the NYSE bounced up to 52% at the close Friday.  Any number below 50% suggests trouble for the market.

New-lows outpaced new-highs today leaving the spread at -5 (it was -30 Friday), with the 10-day moving average of change in spread trending up. 

Monday’s reading of Internals is positive for the markets.  Breadth is trending up while the S&P 500 is nearly flat over the last 10-days. 

My take is that this is a short-term indication.  I just don’t see other indicators signaling a longer term, durable bounce that would clear out the old highs. Corrections don’t go straight down, but we could easily see a good bounce now. 

Monday, the overall NTSM analysis was HOLD 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.