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Discussion in 'Stock Market Today' started by Stockaholic, Apr 1, 2016.
Post bearish thoughts and analysis here...
I've been bullish ever since I joined HSM at the start of 2013.
This week, I think I became solidly bearish for the first time.
Preliminary earnings for Q4 came in at a measly $18.70. You wanna talk about business falling from grace? Q3 2014 earnings were $27.47....
P/E is in the 23 or 24 range and forward looking estimates are built on pathetic hopes and dreams. We are somehow supposed to create an all time high in earnings a measly two quarters after this past quarter's disaster. Even with these wild forward looking estimates, we won't even be sniffing 15 P/E if the expected earnings by Q4 2017 happened at today's price. It would take over two years of heavy growth and zero price appreciation in the markets. Does nobody see an economic slowdown at any point in the next two years?
Not to mention, we have many other insane factors. The Presidential Election is likely to create some chaos, the economy hasn't had a recession since 2007 and these things tend to work in cycles. Looking at previous cycles of earnings decrease, I see little evidence to support the idea that we will magically recover within a quarter.
All of this is also coming off the backs of companies using low interest rates to buy back shares and inflate their EPS. We've had 8 straight quarters of at least 20% of companies reducing their float by over 4%.
That said, if conditions turn around quickly here, I will adjust my position. For now though, I see absolutely zero evidence or reason to support a bullish case. Just a bunch of hope, but the bulls whose positions thrive on hope tend to lose out on their holdings very quickly, and then sell too late... (see 08)
Google z3news nisan 17
Alotta signs of a crash coming near end of april, begins from Germany.... germany goes down, we all go down... how long it takes, ahhhh, the million dollar question. Could be thee lotto play of the year.
I haven't learned/paid attention to the overall world markets aside from US, but what's wrong with Germany?
The only other issues I've heard about is the slowing growth in China and worries about Britain leaving the Euro.
An interesting read I like how this guy puts it all together... Currently I am short the S&P. Which is why I am posting this in the bear thread... As always goodluck!! Feeding the monster is also a good read!! Link is in the article...
The Big Move
By northmantrader • April 16, 2016
A big move is coming in the S&P 500 and it will take everyone’s breath away. Simply put: The S&P 500 has traded in a multi-year consolidation range with a high of 2134 and a low of 1810. A breakout or breakdown out of this range could result in a measured technical move of the height of the range, i.e. 2134 – 1810 = 324 handles. Consequently a break toward the upside would target 2458 (15% above all time highs) and conversely a breakdown would target 1486 and represent a 30.4% correction off of all time highs.
I’ve outlined the bear arguments in detail in Feeding the Monster, so I won’t bother rehashing them here. However, in analyzing the larger market structures an interesting duality is emerging: A fight for control between the historic precedence of earnings and technicals and a very much divergent development in money supply, one of the key drivers behind stock prices since the financial crisis.
This duality can be summarized in one chart:
Speaking for a breakdown so far is the historical similarity in structure of the monthly RSI and a decrease in GAAP earnings since 2015. Furthermore the $SPX has broken its ascending trend line in 2015 coinciding almost perfectly with the peak in GAAP earnings. These 3 developments are bearish in any historical context.
Note though something curious has happened during the same time: While price has recovered dramatically since February the continued decrease in earnings has made stocks the most expensive in years with a GAAP P/E ratio north of 24.
Another key consideration: M1 money supply has continued to rise and print new record highs, not really deviating from the path it has embarked on ever since the financial crisis.
The reasons are generally well known as the Fed is a key source of influence:
While the Fed has ended QE3 in October 2014 and is supposedly on some sort of rate hike path the evidence shows that its balance sheet has not only not decreased but it has stayed in a range and even made new highs in 2015. Just like the S&P 500. Imagine that:
And this issue highlights the battle for control here and the argument for a break higher:
A: A potential continued increase in M1 money supply which just made a new all time high in April:
B: Should earnings revert higher (against current trend) then the combination of increased money supply & improved earnings would support the notion of an equity move toward the upper measured move target.
And perhaps markets are anticipating this move as evidenced by a sudden breakout in the cumulative advance/decline index:
However and perhaps a warning sign that things are not as well as they suddenly seem: The $NYSE composite index just barely managed to get back to 2007 highs, a somewhat unimpressive result considering that it took over $4.5 trillion in Fed balance sheet expansion and a $10 trillion increase in US debt to get back to the same levels. And note it too, just like the $SPX, broke a key trend line in 2015:
The bottom line: This is a big battle for control. On the one hand fundamentals and technicals suggest a breakdown of size may well be in the cards, while on the other hand, continued “highly accommodative” central bank policies coupled with perhaps an incremental relative improvement in earnings to come may result in a breakout making stocks even more expensive than they are now, the classic blow-off top scenario if you will. Clarity will only emerge once the range is decisively broken in either direction.
Whoever wins this battle gets the big move. 324 handles.
And welcome back Arthur!
Good to be here again!! Just putting out some food for thought if you will...
Nice post, and good read! Thanks for sharing
Shortened Memorial Day Week Not So Hot Recently
Next week’s shortened trading week has a mixed record going back to 1971. Back in the May/June Disaster Area days when DJIA and S&P 500 were down 10 of 17 Mays from 1971-1987, the week after Memorial Day was a poor performer. DJIA, S&P 500 and the Russell 1000 all declined more frequently than not with average losses ranging from .22% to .39%. NASDAQ and Russell 2000 performed slightly better.
Beginning in 1984 and lasting until 1995, Memorial Day week performed exactly the opposite (shaded in grey below). With the exception of three individual losing weeks by different indices, gains were as prevalent as Memorial Day BBQ’s. DJIA, S&P 500 and Russell 1000 all enjoyed average gains of 1.78% to 2.02%. However, during this period NASDAQ and Russell 2000 underperformed.
Since 1995, the overall record is mixed. There was a four-year span of respectable gains from 2006 to 2009, but since 2010 losses have dominated. DJIA, S&P 500, NASDAQ, Russell 1000 and Russell 2000 have all been down in five of the last six Memorial Day weeks. If post-Memorial Day strength fails to buoy the market, then it would we susceptible to profit taken especially now that it is near resistance once again.
S&P 500 down 6 of last 8 on May Jobs report day
May’s job report, scheduled to be released before the market opens on Friday, could mark an important inflection point for the market. The Fed has consistently and clearly stated that they are data-driven and a rate hike is a real possibility in June.
Historically, the May jobs report has been tepidly received by the S&P 500. Over the last 21 years, S&P 500 has lost an average of 0.04% on the day of the report and 0.11% on the following day. Six of the last eight May job release days have been losers with an average loss of 1.08%.
The day before the report is the most bullish of the three days, up 15 of the last 21 years with an average 0.32% advance. Years shaded in grey are the years when the performance the day before matches the release dates performance. In 21 years, this has occurred 13 times.
I've been bullish since following the market in 2013, switched to bearish in 2016.. Lets see what develops here.
WASHINGTON (MarketWatch) — There’s more than a one-in-three chance of a U.S. recession in the next 12 months, J.P. Morgan Chase economists said Friday after the release of dismal jobs numbers.
The economists say there’s now a 36% chance of a recession in 12 months, the highest its recession tracker has been since the U.S. last exited recession, and up from 30% last month.
Oddly, it was not the fact that the U.S. added only 38,000 jobs that moved the dial. The decline in the unemployment rate, paradoxically, raises the chance of economic overheating in the medium run, the economists said in a research note.
Other disappointments have come from Dallas Fed indicators on manufacturing and services, the ISM services index, and the Conference Board’s consumer confidence report.
Other economists also are raising concerns. David Rosenberg, chief economist and strategist at Gluskin Sheff, notes that goods-producing employment has contracted for 4 months in a row, with 77,000 jobs lost over the time period. That’s the kind of decline last seen in Nov. 1969, May 1974, Dec. 1979, Oct. 1989, Nov. 2000 and May 2007 — all of which predated recessions, by an average of 5 months.
The only time there hasn’t been a recession following a big drop in goods-producing employment was during the 1985 and 1986 oil-price collapse
20yr chart of the cboe volatility index
its not often you see this at low readings where its at currently ... or at least not for very long
How many traders sold the farm when the Brexit fallout hit. Until the next global calamity...TTT
Welcome back arthur626, @ YLC go to post #125 in the BREXIT thread there is a short clip and the clip is Putin telling what will happen to Germany because of Merkel policies. There is something big brewing and all signs are pointing to a collapse in Europe, negative interest rates which make no sense, money flowed to India and China, sovereign debt is in a crisis for some countries so eventually money will flow to the private sector(markets) so I remain a bull.
trannies still not participating in the market rally ...
September’s First Trading Day Bullishness Fading
Although the first trading day of September has been up in 13 of the last 21 years, this trend appears to be fading as the S&P 500 has been down six of the last eight first trading days. This trend is reflected in the DJIA while NASDAQ has been up in four of the last eight first trading days. Last year’s nearly 3% across the board shelling was the worst first trading day of September since 2002. This year the first trading day falls on Thursday before the three-day Labor Day holiday weekend and could be influenced by lower than average volume due to the holiday.
Trading before Labor Day Mixed
In recent years, Labor Day has become the unofficial end of summer and the three-day weekend has become prime vacation time for many. Business activity ahead of the holiday was more energetic in the old days. From 1950 through 1977 the three days before Labor Day pushed the DJIA higher in twenty-five of twenty-eight years. However, since then the days leading up to the long weekend have become mixed. In the last 21 years, DJIA and S&P 500 have registered average losses on the Thursday before of 0.15% and 0.08% respectively with more declining days than advancing. NASDAQ and Russell 2000 performance on Thursday has been slightly better but the percentage of positive days still lingers right around 50%. The Friday before Labor Day is slightly more bullish, but only slightly. The Russell 2000 small-cap index has the best record of gains, up 61.9% of the time, but sizable declines in 2013 and 2011 keep its overall average performance in check.
surprised this thread hasn't been bumped
i don't really have much "bearish" thoughts or analysis at this time but i was wondering how many of you guys in here think this upcoming u.s. presidential election could impact the markets this upcoming week? i mean we're already down 9 days in a row on the cash s&p (the longest losing streak since 1980) however we have not even seen a down day of -1% on this current streak yet and we're only off about roughly -5% from the all-time high ... which leads me to believe that we have not endured enough pain (yet) ... anyone thinking we'll see a violent move ahead triggered by the election? these next couple of days & weeks are going to be pretty damn interesting i think...stay tuned lol
It seems to me that everyone is on the fence and don't know which way to go from here. The lack of a big move one way or the other leads me to think we will remain status quo till the election is over. I believe that the markets as a whole are like most of us and just want the dang election over and get on with our lives. I believe most everyone has went to cash for a while and waiting this thing out (me included). I would like to be actively trading like normal but don't trust the markets enough to take that step. There are bargains to be had, maybe I'm too cheap, chicken poop, too green to trading, or a little of all to dive in here. I think the bottom of most stocks is yet to be seen. This being said, I will concluded IMO that most bottoms should show themselves this week, or I hope so. I would like to get off the side lines and get back to making some $$$.
Been reading a lot of statistical matter on prior market reactions to presidential elections. The general consensus is that the markets kinda have priced in a Clinton win already, but the ten million $$ question is what will the markets do if Trump wins. I compare this election to this years world series, something we've never seen before and probably won't in our lifetimes. Sorry to rant so long, Cy reopened this thread (lol), and I felt obligated to throw out my half butt opinion. I'm really good at that. Good luck to all in these wild times and buckle up for IMO will be a roller coaster ride this week. My finger will be near the buy and sell icon alot I will guarantee that for sure.