“With 41% of the companies in the S&P 500 reporting actual results for Q3 to date, more companies are reporting both actual EPS above estimates (75%) and actual sales above estimates (60%) compared to recent historical averages…Companies have begun to lower expectations for the fourth quarter, as 29 companies in the index have issued negative EPS guidance while 8 companies have issued positive EPS guidance. With the recent uptick in the market this past week, the forward 12-month P/E ratio is now 15.2, which is still above the 5-year and 10-year averages.” Excerpt from FACTSET at…
http://www.factset.com/websitefiles/PDFs/earningsinsight/earningsinsight_10.24.14/view
The lowered expectations are in line with normal negative forward guidance.
INVESTORS EXPECTING TOO MUCH? RECOVERY PRICED IN (Bloomberg)
“…investors are finding their patience taxed after waiting five years for economic growth to catch up with the market. From March 2009 through June 2014, the S&P 500 has increased 4.7 percent a quarter, about five times faster than gross domestic product, data compiled by Bloomberg show. That's the biggest gap since at least 1947. "I don't think the dispersion can sustain at the level that it did, which is why the market is struggling," Daniel Genter, who oversees about $4.5 billion as chief executive officer at Los Angeles-based RNC Genter Capital Management, said in a phone interview on Oct. 22. "The market wants to see growth going in the right direction or it's going to be upset." Story at…
http://finance.yahoo.com/news/p-500-rising-five-times-141136346.html
HUSSMAN ON THE COMING CRASH (Hussman Funds)
“What characterizes the instances below [a series of charts on the Hussman Funds website indicating declines, subsequent improvement, followed by market crashes including 1929, 1987, 2000, 2007] is not simply a decline from a market peak and a subsequent rally, but the sequence from historically extreme overvalued, overbought, overbullish conditions…to a deterioration in market internals, an initial "air pocket" decline, and a subsequent short-squeeze that fails to restore market internals to a favorable condition…we continue to view present market conditions as among the most hostile in history, coupling rich valuations with market internals that remain unfavorable on historically reliable measures…we continue to view a 40-50% market loss as having very reasonable plausibility over the completion of this market cycle.” Commentary at…
http://www.hussmanfunds.com/wmc/wmc141027.htm
I thought Hussman was right in 2013 and was out of the markets for much of the year missing a lot of 2013 gains. I should be a charter member of the “Hussman Hater Club”. I’m not because I recognize that his rigorous analysis is interesting and instructive. So far, he has been early with the warnings, but we must recognize that someday he may be right. In the meantime, I am not investing in Fear; I am fully invested, but there are issues Hussman raises that are concerning.
The 50-dMA of the percentage of stocks advancing was 50.2% at the recent high in September 2014. At the highs in February 2014, the 50-dMA of percentage of stocks advancing was 54.3%. With less stocks moving forward at the top, there is trouble ahead unless this trend reverses.
Now to a different 50-dMA.
50-dMA OF THE S&P 500
The 50-dMA of the S&P 500 is 1967 and that is an important hurdle for the S&P 500.
MARKET REPORT
Monday, the S&P 500 was down about 0.2% to 1962 (rounded).
VIX was down about 0.4% to 16.04.
The yield on the 10-year Treasury Note remained 2.27%.
I’m watching the charts. The Index must break thru the 50-dMA and also, it needs to make new highs. If not, the index will reflect a head and shoulders pattern or possibly a double top. Both are bearish. Interpreting chart patterns is sometimes complex, but really, it’s simple. If the market can’t go up, it will go down.
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of the percentage of stocks advancing (NYSE) rose to 61% at the close Monday. (A number above 50% is usually good news for the markets.) New-highs outpaced New-lows Monday. The spread (new-highs minus new-lows) was +57. (It was +57 Friday). The 10-day moving average of change in the spread was +47. In other words, over the last 10-days, on average, the spread has increased by 47 each day. Internals remained positive 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 2013, using these
internals alone would have made a 16% return vs. 30% for the S&P 500 (in on
Positive out on Negative – no shorting).
Of course, few trend-following systems will do well in an extreme
low-volatility, straight-up year like 2013.
NTSM
The long-term NTSM system analysis is HOLD on the market. VIX remains too high to swing the NTSM system to Buy, but not by much. I called a BUY on 17 October based on Technical analysis.
MY INVESTED STOCK POSITION
I moved some funds back into the market on Friday, 17
October 2014 as a trade and increased my position
in stocks from 30% to about 40% overall.
I added more Monday, 20 Oct, to bring my stock investments up to 50%.
This move was based on my comments 16 Oct that a Tradable bottom had been
set. It appears that this will be a
durable bottom and not just a trade.
Either way, since I am semi-retired, 50% is Fully-invested for me.--INDIVIDUAL STOCKS FROM A VALUE HOUND--
ENSCO (ESV): BUY?
The chart looks good and oil prices are close to a bottom so I think Ensco is again a Buy. See related video on this page…
http://finance.yahoo.com/q?s=esv&ql=1
Discussion on oil prices on CNBC were all over the place Monday, from $80 to $65. It reminds me of 2007 when there were experts on CNBC predicting $10/gallon gas.
