“Overall, 53 companies have reported earnings to date…Of these 53 companies, 57% have reported actual EPS above the mean EPS estimate and 43% have reported actual EPS below the mean EPS estimate. The percentage of companies reporting EPS above the mean EPS estimate is well below the 1-year (71%) average and the 4-year (73%) average... At this point in time, 111 companies in the index have issued EPS guidance for the fourth quarter. Of these 111 companies, 96 have issued negative EPS guidance and 15 have issued positive EPS guidance. Thus, the percentage of companies issuing negative EPS guidance to date for the fourth quarter is 86% (96 out of 111). This percentage is well above the 5-year average of 64%.”
http://www.factset.com/websitefiles/PDFs/earningsinsight/earningsinsight_1.17.14/view
FACTSET reports revenues have been in-line. It is important to note that
analysts have been reducing revenue projections all year so it is not
particularly positive that revenues are in line with projections. Earnings increased last year as companies cut
expenses. Earnings are critical. At some
point, companies can no longer make the cuts needed to keep earnings up.
What do Intel, JC Penny, Macy, Nordstrom have in common? They are all reducing staff due to poor sales.
Macy: http://articles.chicagotribune.com/2014-01-09/business/chi-macys-layoffs-store-closings-20140108_1_macy-premarket-trading-stores
Nordstrom: http://news.google.com/newspapers?nid=1314&dat=19900909&id=hGtXAAAAIBAJ&sjid=h_ADAAAAIBAJ&pg=5643,5769001
-VIX: VIX was 12.18 on 10 January2014.
For all of 2013, whenever VIX got down to that vicinity (11.98-12.50)
there was a small pullback of around 5%.
I usually look at the trend in VIX rather than its value. This time though, the “value” may have some
value in predicting trouble for the markets.
I think the current level of around 12 presages a pullback.
-SENTIMENT: Sentiment (5-dMA of selected Rydex/Guggenheim funds)
has fallen from its peak of 83%-bulls on 30 December to its current level of
79% as of the close on Friday. Pullbacks
in Sentiment happen all the time, but they are frequently associated with
pullbacks (small or large) from a top.
When the buy-the-dip crowd buys after the top, sentiment usually peaks
again after the top. Since sentiment has
been falling, this is a hint that the top may have been 31
December, i.e., the speculating herd is now much less bullish than just 1-week
ago.
-CHARTS: The S&P 500 managed to climb back to the old
high to make a double top. CNBC reported
“new-highs,” but really, let’s not count a new high if it only broke the prior
high by a few hundredths (1848.38 vs. 1848.36). I think charts also presage a
pullback.
-In addition there were other clues such as the S&P 500 10.1% above
the 200-day moving average on 31 December at the 1848 top and statistical analysis
trends.
The biggest argument against a pullback now is that market internals have been positive. I can only say that while internals are positive, they have been deteriorating. So far, there may only be CLUES suggesting a pullback. The smoking gun has not been found.
MARKET REPORT
The markets are closed for Martin Luther King Day.
