Monday, October 21, 2013

Earnings and Guidance Weak… NYSE and the Federal Reserve Announce Partnership: From now on Stocks only go UP


“Earnings Scorecard…With 19% of the companies in the S&P 500 reporting actual results, the percentage of companies reporting earnings above estimates is below the four-year average, and the percentage of companies reporting revenue above estimates is also below the four-year average.” - Factset earnings Insight 18 October 2013
CMT:  The expectations have been lowered so much that these weak results seem to reflect significant slowing.  Guidance shows the same, so far, but it is early in the earnings reporting season, so we’ll see.

“[A] High Percentage of Companies Have Issued Negative EPS Guidance (78%) for Q4.  At this early stage of Q3 2013 earnings season, 18 companies in the index have issued EPS guidance for the fourth quarter. Of these 18 companies, 14 have issued negative EPS guidance and 4 have issued positive EPS guidance. Thus, the percentage of companies issuing negative EPS guidance to date for the fourth quarter is 78% (14 out of 18). This percentage is well above the 5-year average of 63%.”  Excerpted from the Factset Earnings Insight for 18 Oct 2013 found at…

If this trend continues, it is unlikely that stock prices will keep going up, but I have no idea when, or even if, prices will be affected.   Bad was expected so bad may not be bad.  (Confused? Me too.) The “don’t-fight-the-fed” market may continue upward seemingly without end.

The S&P 500 is now 8.4% above its 200-day moving average.  That’s fairly high.
When this value has reached about 10% above the 200-dMA the S&P 500 has corrected, although this year the corrections have been shallow, so far.

“Thanks to the government shutdown, the Labor Department will release the key nonfarm payrolls report 18 days later than initially scheduled. Economists polled by MarketWatch expect 185,000 new jobs in September, up from 169,000 in August. The unemployment rate is seen staying at 7.3%.”  Story at…

It’s not likely, but it’s not impossible either, especially if the data surprises to the upside by a lot.  So look for good news to be bad news for the market tomorrow if the data exceeds expectations.

Monday, the S&P finished slightly up, but basically unchanged to 1645 (rounded) at the close.
VIX was up nearly 1% to 13.16. 

The 10-day moving average of stocks advancing is 59%. (A number above 50% for the 10-day average is generally good news for the market.) 

New-highs outpaced new-lows Monday, leaving the spread (new-hi minus new-low) at +322 (it was +442 Friday).  The 10-day moving average of change in the spread is plus 31.

Market Internals remain Positive on the market for this short term indicator, but VIX was up and Breadth poor today so it suggests a small down-day for tomorrow.

I am not rushing back into the market because: (1) I am looking for a better buying opportunity and (2) today the S&P 500 is only 2% above the Top of 2 August and 1% above the Top of 18 September so basically I am still concerned that the S&P 500 could be at a triple-top.  Bottom line…I’m waiting a bit further before joining the insanity by investing more in stocks.  I’ve mentioned a couple of other reasons in recent blog posts.

TRADER COMMENT:  “Every indictorI know is not working, and has not worked in years….we keep going up as long as QE is on.  It works until it doesn’t”

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.