WORST NEWS OF 2014 – IT’S EARNINGS (iSPYETF)
“According to FactSet, 94 out of 107 companies on the S&P 500 that have issued an earnings outlook for the fourth quarter have fallen below Wall Street consensus. This 88% ‘over promise’ rate is the most pessimistic reading since FactSet started tracking the data in 2006.” Commentary at… http://www.ispyetf.com/view_article.php?slug=The_3_Worst_Pieces_of_News_So_Far_in_2014&ID=333
EARNINGS SEASON (Zacks)
“…we now have 2013 Q4 results from 51 S&P 500 members
that combined account for account for 15.7% of the index’s total membership.
Total earnings for these 51 companies are up +15.1%, with 56% coming ahead of
consensus earnings expectations. Total revenues are up +3.4% and 54% are
beating top-line expectations. For the Finance sector where results from 44.8%
of the sector’s total market capitalization are already out as of this morning,
while earnings are up in double digits, thanks to easy comparisons, fewer
companies have come out with positive earnings and revenue surprises….Most of
the results thus far pertain to the Finance sector and we haven’t seen any
surprises there. It’s relatively early, but the handful of reports
outside of Finance don’t inspire much confidence.” – Sheraz Mian. Full story at…
GLOOM ON WALL STREET – EARNINGS DISAPPOINT (NY Times, 16
Jan 2014)
“…the stock market is “fragile” right now, said G. Scott
Clemons, chief investment strategist at Brown Brothers Harriman. “If something
were to go wrong, like if this earnings season continues to disappoint, I think
any negative market reaction would be magnified,” Mr. Clemons said. “The market
is not as resilient as it was last year.” Best Buy was by far the biggest
percentage loser in the S&P 500 after the electronics retailer reported a
decline in sales during the crucial holiday season. Its shares plunged…28.6
percent…” Full story at…http://www.nytimes.com/2014/01/17/business/daily-stock-market-activity.html?_r=0
I’ll be following earnings next
week as we should have a much better picture by next Friday.
OBAMACARE LIMITS MY HOSPITAL ACCESS (and I had a Cadillac policy)
I was recently scheduled for a medical test at Norfolk Sentara general
Hospital. I have been there before and
my insurance company has always covered it; but no more. I received a letter yesterday indicating that
Norfolk General Hospital, long considered the Gold standard locally, is no
longer “in-network” for my insurance company. Thank-you, Obama and the rest of
the politicos who voted for, and lied about, the complicated, unwieldy, and
expensive “Affordable Care Act.” Here’s
a “summary” of the ACA; the summary is 13 pages long!
MARKET REPORT
Friday, the S&P 500 was down 0.4% to 1839 (rounded).
VIX fell about 0.7% to 12.44.
The 10-year Treasury Note closed at 2.82% yield. Rates at 3% or above are considered
by some traders to be “trouble-for-stocks”.
Reasons the S&P 500 is NOT in a Correction: VIX is flat so no worries about a correction from the Options Boys. Sentiment held at 80%-bulls Friday, a screaming high value, but no new information there. Market Internals still look good.
Reasons the S&P 500 IS in a Correction: The S&P 500 was 10.1% above its 200-dMA at the high on 31 December. The chart isn’t pretty since the 31 December high has not been broken in 3-weeks. It tested the high on 15 January and didn’t break thru; that makes a double top the index needs to penetrate. Statistical analysis showed a “calm-before–the-storm” signal in the middle of December and that signal usually predates a top by about a month. That statistical analysis of price-volume action is creeping up and that happens at tops. These reasons do not suggest a major top, but rather a retreat of at least 5%. WARNING: These indicators didn’t work well in the 2013 QE-Infinity era. If earnings continue to underwhelm, then we may see a pullback; but of course, earnings haven’t been strong (with good revenue growth) for a year. The S&P 500 went up 30% last year because PE’s expanded (i.e., investors paid more for a dollar of earnings) not because earnings went up 30%.
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of stocks advancing fell to 55% at the close Friday. (A number above 50% for the 10-day average is generally good news for the market.) New-highs outpaced new-lows Friday, leaving the spread (new-hi minus new-low) at +156 (it was +161 Thursday). The 10-day moving average of change in the spread declined to +8. In other words, over the last 10-days, on average, the spread has increased by 8 each day.
Reasons the S&P 500 is NOT in a Correction: VIX is flat so no worries about a correction from the Options Boys. Sentiment held at 80%-bulls Friday, a screaming high value, but no new information there. Market Internals still look good.
Reasons the S&P 500 IS in a Correction: The S&P 500 was 10.1% above its 200-dMA at the high on 31 December. The chart isn’t pretty since the 31 December high has not been broken in 3-weeks. It tested the high on 15 January and didn’t break thru; that makes a double top the index needs to penetrate. Statistical analysis showed a “calm-before–the-storm” signal in the middle of December and that signal usually predates a top by about a month. That statistical analysis of price-volume action is creeping up and that happens at tops. These reasons do not suggest a major top, but rather a retreat of at least 5%. WARNING: These indicators didn’t work well in the 2013 QE-Infinity era. If earnings continue to underwhelm, then we may see a pullback; but of course, earnings haven’t been strong (with good revenue growth) for a year. The S&P 500 went up 30% last year because PE’s expanded (i.e., investors paid more for a dollar of earnings) not because earnings went up 30%.
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of stocks advancing fell to 55% at the close Friday. (A number above 50% for the 10-day average is generally good news for the market.) New-highs outpaced new-lows Friday, leaving the spread (new-hi minus new-low) at +156 (it was +161 Thursday). The 10-day moving average of change in the spread declined to +8. In other words, over the last 10-days, on average, the spread has increased by 8 each day.
NTSM
The four areas of analysis, Sentiment, Price, Volume and
VIX haven’t changed and are currently rated as follows:
Sentiment remains screaming high, with no change from
yesterday, at 80%-bulls (5-dMA of selected Rydex/Guggenheim funds) and that’s a
negative; Price is positive since up-days have been larger than down-days over
the past month; VIX and Volume remain neutral.
The most recent BUY signal for the NTSM system was 25
October. The “5-10-20 Timer” switched to
BUY from HOLD on 18 December.
MY INVESTED POSITION
I am about 30% invested in stocks as of 20 December
(S&P 500-1540) because I upped my stock holdings by 10% on the 20th
of December. Unless I get a SELL signal
in the NTSM system, I will continue to income-average (a little each month)
into the stocks to get my %-invested up to around 50% (max for me now) unless
there is a correction that would allow me to move in sooner and at a higher
percentage. Since that is my expectation, I have not upped my invested
percentage in one move as I normally would.
