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Tuesday, March 1, 2016

Daily update 3/1 Earnings.

Pop.  All it took was a lot of bad economic data from around the world to inspire the bulls to load up on stocks.  I guess people are hopeful for more stimulus.  Sounds like a good investment thesis to me.

I think we can call that panic buying.  Breadth was +78% so they were loading up on nearly everything.  New highs increased considerably to 74.  New lows were in the same area at 25.  Today covered most of the distance to the next resistance level in the 1995-2000 area.  Quite a showing by the bulls.

The futures popped up through the 200 SMA.  We do not have a confirmed break yet.  That MA can be very strong support or resistance.  The rally could run into trouble here. 

There are many bear market rallies that ended on buying capitulation type days.  This fits that bill.  I don't really know if SPX will get up to the next target or not.  I messed up last night.  I forgot yesterday was the last trading day of the month.  I have mentioned a number of times how unreliable those days are for future direction.  It is also common for the first trading day of the month to do the opposite.  It did the opposite today only magnified.  The VIX plummeted to 17.70 which is very low for a bear market.  It got down to a 15 handle in May of 2008 just before things fell apart.  So it can go lower.  This rally is clearly on borrowed time, but there is no law that says it can't go higher.  The next ECB meeting is on March 10.  They are expected to do something.  It is possible that keeps the sellers at bay until after that announcement.  For the moment the bulls are still in control.  Lets see what they do with it.

I don't seem to hear much about earnings these days.  I guess the pundits don't want anybody to know what is really going on.  Here is a chart of GAAP versus fictional earnings.

Two things of note here.  Notice the gap between real and fictional earnings is the biggest since 2008 (the last recession).  The lies keep getting bigger.  The other thing of note is that real earnings haven't been this low since 2010.  SPX was much lower back in those days.  Stocks are still very expensive.


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