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Wednesday, February 25, 2015

Daily update 2/25 Projected revenue and earnings drops

SPX ran into a few sellers just below 2020.  Here is the chart.

SPY closed with a near perfect doji bar so the apparent doji in SPX is real.  Volume increase slightly today.  A doji bar after a big run up on increasing volume is a bit of a caution flag.  The rally may be running out of steam.  Today was the first real selling pressure we have seen in over a week.  It didn't last long though.  There was real and present resistance today at 2020.  How strong that resistance is remains to be seen.  Despite making a new intraday high new highs dropped from 192 yesterday down to 153.  Not the sign of a market gaining strength.  Lets see what the futures chart holds.

The overnight range was once again extremely tight.  The world must have a very odd calm in the news flow at the moment.  The futures remain very extended from the 100 SMA.  Not much more to be gleaned here. 

It looks like we have found resistance on the upside at 2020.  We still have 2100 to watch on the downside.  In between price action is likely to be sloppy.  The transports and financials still have not made new highs.  I believe at least one of them must do that to help validate the move in the other indexes.  They are important cogs in the wheel.  Will today's pause be met with buying tomorrow?  Will the bears try to pounce after the market found resistance at 2020?  I usually know what questions to ask.  Now if I could just know the answers.

Here are some interesting charts on projected revenue and earnings this year.


This is the first time in this bull market the YoY revenue is expected to decline.  Obviously the dollar and oil are playing a big part in that.  Will high market valuations hold up if the projected revenue decline turns out to be real.


In the last 30 years the 6 month change line has only been this negative three other times.  All three times were associated with a recession (1990, 2001, and 2008).  Maybe it is different this time.  Maybe it isn't.  I am not smart enough to know.  The global economy is clearly weakening.  So far this year 20 central banks have taken easing actions.  At least a few of those were big surprises.  The global economy could be headed for a recession for all we know.  That would make sense with the collapse in commodity prices.  We need much more economic data to be able to figure that out.  Just be aware that could be the case.  I doubt the U.S. will decouple from a global recession.  If there is one thing we have learned in recent years is that the global economy is more connected then ever before.


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