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Friday, April 1, 2016

Daily update 4/1 Earnings expectations

First day of the month lives up to its reputation despite starting with a gap down.

Despite almost all indexes positive the breadth was slightly neg.  Odd.  New highs were strong once again at 181.  Too bad the first day of the month does not give us a good sign of what comes next. 

The futures tested the 20 SMA this morning and bounced.  That helped bring in the buyers.  However, we hit a resistance line.  Will it be significant or temporary like the lower red line was?

The green count popped up considerably today.  It is still short of the overbought level.  More room to run if the above mentioned resistance does not stop us.

Here is a good look at the latest earnings expectations.  Get ready for a rough corporate earnings season

Only three sectors are expected to have positive earnings growth.  Obviously expectations are very low.  That should make them easy to beat.  However, with stock prices bid up beating may still be trouble for the price.  Once upon a time in a more free market prices used to get marked down when expectations were lowered.  That created plenty or room to rally on beats.  With SPX just a stones throwfrom the high and valuations high there is plenty of room for disappointment even on beats.

While U.S. economic data continues to come in good, that is not the case in the rest of the world.  Does that matter?  Earnings are doing poorly as well.  The market seems to be totally and completely disconnected from fundamentals.  The resolution of this condition will depend on whether the fundamentals improve to catch up to price or not.  Otherwise, price will eventually catch down to fundamentals.  The transports, oil, and high yield bonds have stopped going up.  The transports made a higher low in Feb. while SPX made a lower low.  It was a bit of an early warning signal on this rally.  It bears watching as it could be an early warning signal now in the other direction. 

The market and sector status pages have been updated.  Have a great weekend.


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The information in this blog is provided for educational purposes only and is not to be construed as investment advice.