“As of [Friday] (with 23% of the companies in the S&P
500 reporting earnings for Q3 2016), 78% of S&P 500 companies have reported
earnings above the mean estimate and 65% of S&P 500 companies have reported
sales above the mean estimate. For Q3
2016, the blended earnings decline for the S&P 500 is -0.3%. If the index
reports a decline in earnings for Q3, it will mark the first time the index has
recorded six consecutive quarters of year-over-year declines in earnings since
FactSet began tracking the data in Q3 2008.” FACTSET Earnings Insight.
My cmt: (The term “blended earnings” combines reported
earnings with estimates of companies yet to report.) As previously reported,
company earnings have been declining. At
this point, it appears that the decline may be over, i.e., the earnings decline
has bottomed. Those who believe the
decline is over are calling for a year-end bounce in the S&P 500. Those who take the opposite view are calling
for recession. FACTSET did point out
that the Energy sector will start contributing to S&P earnings during Q1
2017. If it weren’t for Energy, the S&P would have shown positive earnings
growth in 4 of the last 5 quarters. I have no crystal ball, but with energy expected
to generate growth, earnings seem likely to grow. Now all we’ll need to worry
about is the FED.
MARKET REPORT / ANALYSIS
-Friday the S&P 500 was unchanged at 2141.
-VIX fell about 3% to 13.34 near the close.
-The yield on the 10-year Treasury slipped a bit to 1.74%.
As previously noted, I Sold my 2xDow position because my calm-Before-the-Storm
indicator was indicating trouble ahead in the markets. Other indicators are mixed, but there has
been a lot of late day selling so it appears that the Pros are nervous.
The calm-before-the-storm indicator turned neutral Friday
(after I sold my long position of course).
Long-term, I’m fully invested at 50% in stocks (a
conservative-retiree allocation) – I’m hold-my-nose bullish.
TRADING PORTFOLIO
Ouch. It was my intention to remain long, but with mixed
indicators I bailed early Friday since I was unable to keep an eye on the
markets due to other commitments. With 4-straight losers, it’s time to consider
my lack of patience and reconsider signals.
FRIDAY MARKET INTERNALS (NYSE DATA)
-10-day moving average of the percentage of stocks
advancing (NYSE): 50.1%. (43% yesterday.) A number above 50% is usually BULLISH
for the markets short-term.
-150-day moving average of advancing stocks: 53.3%. (A
value above 50% indicates a long-term, up-trend.)
-McClellan Oscillator: improved from -6 to -5 (percentage
calculation method), essentially unchanged.
-New-highs minus new-lows: 44 (It was 54 Thursday.)
-10-day moving average of the change in spread: +1. In
other words, over the last 10-days, on average, the spread has increased by 1
each day.
Market Internals remained
neutral on the market.
Market Internals are a decent trend-following analysis of
current market action, but should not be used alone for short term trading.
They are usually right, but they are often late. They are most useful when they diverge from
the Index. In 2014, using these
internals alone would have made a 9% return vs. 13% for the S&P 500 (in on
Positive, out on Negative – no shorting).
LONG TERM INDICATOR
Friday the Price, VIX, Volume, & Sentiment indicators
were neutral. Overall the long-term indicator remained HOLD.
MY INVESTED STOCK POSITION:
TSP (RETIREMENT ACCOUNT – GOV EMPLOYEES) ALLOCATION
I increased stock allocation to 50% stocks in
the S&P 500 Index fund (C-Fund) Friday, 23 Sep in my long-term accounts
based on a number of indicators. Remainder is 50% G-Fund. This is a
conservative retiree allocation.
