Are Bad Earnings Already Priced In?

It's amazing what a 200+ point rally can do to an investor psyche. And while everyone was incredibly bearish last week, with numerous commentators predicting an outright collapse, we are back to talking about the Dow 20K. All of this noise aside, here are the two fundamental drivers that will guide the markets over the next few weeks.

  • Q-1 Earnings: As is often discussed on this blog, I expect Q-1 earnings to be fairly poor. For two reasons. First, the US Economy is rolling over and second, due to a massive rally in the US Dollar over the last 4 months. Further, I expect quite a few corporates to guide down. The question is......has the market already priced this in or not? If the answer is NO, don't be surprised to see a quick 10% correction.
  • The FED: While everyone is trying to figure out what the FED will do, the entire notion is misleading.  What I believe most investors are missing here is the fact that it is already too late for the FED to stop the upcoming bear market. Even if the rate hikes are paused or cancelled,  the damage has already been done. We are already in a massive overvaluation bubble that will have to be corrected. One way or another.

Then again, don't worry about any of that. Mr. Siegel is feeling much better about the stock market and you should buy, buy, buy.....

z32

Are Bad Earnings Already Priced In? Google

Investment Grin Of The Day

A blonde woman walks into a bank in NYC before going on vacation and asks for a $5,000 loan.

The banker asks, "Okay, miss, is there anything you would like to use as collateral?"

The woman says, "Yes, of course. I'll use my Rolls Royce."

The banker, stunned, asks, "A $250,000 Rolls Royce? Really?"

The woman is completely positive. She hands over the keys, as the bankers and loan officers laugh at her. They check her credentials, make sure she is the title owner. Everything checks out. They park it in their underground garage for two weeks.

When she comes back, she pays off the $5,000 loan as well as the $15.41 interest.

The loan officer says, "Miss, we are very appreciative of your business with us, but I have one question. We looked you up and found out that you are a multi-millionaire. Why would you want to borrow $5,000?"

The woman replies, "Where else in New York City can I park my car for two weeks for only $15.41 and expect it to be there when I return?"

Z30

Investment Grin Of The Day Google

Two Hedge Fund Managers Discuss The Stock Market, Currencies, Commodities & Investment Ideas – Weekly Podcast

BRAND NEW!!!  March 28th, 2015: We have a great show for you this week. Hedge fund managers Matthew Demeter and Alex Dvorkin discuss the following topics....

  • What the stock market is doing and what we expect to happen over the next few weeks.
  • COT Report and what the big guys are buying. Listen to make sure you are not on the wrong side of the trade.
  • Deflation, employment numbers, gold, geopolitical and macroeconomic issues.
  • A multitude of great investment ideas and various tops/bottoms that can make you a ton of money.
  • And of course, much.....much more.

Don't miss this one and join us again next Saturday. 

Listen to the podcast by clicking on the player above. If you prefer iTunes, please Click Here

Z30

Two Hedge Fund Managers Discuss The Stock Market, Currencies, Commodities & Investment Ideas - Weekly Podcast Google

Hey Bulls, Step Up Or Else

Daily Chart AMarch 27th

3/27/2015 - An up day with the Dow Jones up 32 points (+0.18%) and the Nasdaq up 28 points (+0.27%)

It appears everyone left for the Hamptons a day early this week. A lot of interesting stuff going into the weekend. Let's take a look.

There has been a lot discussion lately about weather or not the stock market is overvalued. And while the bears claim that it is, as I do, the bull tend to pretend we are still in the early stages of a secular bull market. The analysis above and the charts associated with it are dead on. Again, today's stock market is just as overvalued as it was at 2007 and 2000 tops. I have no doubt about that. Take a look and decide for yourself.

Well, that is not necessarily true. Consider the following. Just yesterday I have suggested that the Dow Theory might have confirmed trend reversal. You can see it here. Did The Dow Theory Just Confirm Trend Reversal?  Then, take a look at the chart below. I have argued over the last few months that the stock market has been in a distribution, getting ready to roll over, since June 17th, 2014. If you want a more detailed analysis, please Click Here.

NYSE Chart

Finally, as the article above suggests, stock market bulls need to step up their buying or the market might finally break down. There is only one problem with their proposition. I truly believe that being a bull today is equivalent to blowing your brains out. Considering today's overvaluation levels, speculation, slowing earnings, strong dollar, massive divergence between economic data and the stock market, buying stocks today is as close to a financial suicide as anyone can get.

But don't tell that to 99% of market participants out there. 

This conclusion is further supported by my mathematical and timing work. It clearly shows a severe bear market between 2015-2017. In fact, when it starts it will very quickly retrace most of the gains accrued over the last few years.  If you would be interested in learning when the bear market of 2015-2017 will start (to the day) and its internal composition, please CLICK HERE.

(***Please Note: A bear market might have started already, I am simply not disclosing this information. Due to my obligations to my Subscribers I am unable to provide you with more exact forecasts. In fact, I am being “Wishy Washy” at best with my FREE daily updates here. If you would be interested in exact forecasts, dates, times and precise daily coverage, please Click Here). Daily Stock Market Update. March 27th, 2015  InvestWithAlex.com

Did you enjoy this article? If so, please share our blog with your friends as we try to get traction. Gratitude!!!

Hey Bulls, Step Up Or Else Google

Investment Grin Of The Day

titan

z32

Investment Grin Of The Day  Google

Bulls, Rejoice!

happy bulls

Call options are dirt cheap.

The price of bullish call options on the S&P 500(^GSPC) has fallen to historical lows. That means that from a historical standpoint, it is remarkably inexpensive to make a bullish bet on stocks by buying on the options market.

"In terms of how much money it costs you to have exposure in the S&P 500, we're looking at historic lows,

Dennis Davitt of Harvest Volatility Advisors agrees that call options have "never been more economical." On the other hand, he said, "The puts [options to sell] are all-time expensive relative to the calls."

Hmm.... So, let me get this straight. The stock market is sitting near all time highs. Plus, we have a clearly defined bull trend  and most people believe we are in a secular bull market. Yet, the options market is not buying it. This can only mean one of two things. This is either a buying opportunity of a lifetime, as most sell side advisers out there would surely point out,  -OR- we might be on a verge of a bear market.

Call me crazy, but I think the options market is loud and clear here.  

Z30

Bulls, Rejoice! Google

The Secret Behind This Market Sell-Off

Daily Chart AMarch 26rd

3/26/2015 - Another down day with the Dow Jones down 40 points (-0.23%) and the Nasdaq down 13 points (-0.27%). 

Despite the recent sell-off, the stock market remains near all time highs. A stone throws away, so to speak.  Yet, according to David Rosenberg, the stock market will have to deal with the following 4 issues going forward.

1. Earnings momentum has slowed. Bottom-up consensus forecasts for S&P 500 operating earnings growth in the first quarter have fallen to -3.1% from +5.3% year-over-year. "The second quarter has been sliced to -0.7% YoY as well, so technically speaking we could be looking at a mild profits recession here in the US – this is down from the +5.9% estimate at the start of the year," he wrote.

Yes, and as I have suggested before, I believe quite a few companies will guide lower in Q1. We already saw that with Intel a few weeks ago. You can find a more comprehensive analysis here Intel (INTC) Guides Down. Are Others About To Follow?  Intel was just the first. 

2. Valuations are high. The trailing P/E ratio is 20x, compared to the long-run norm of 16x. "It actually is not all that uncommon to see the equity market up in years when EPS growth is flat-ish (as the consensus now believes for 2015) but that requires price-to-earnings multiple expansion.

I have beaten this topic to death here over the last few months. If you take historical metrics into consideration, we are in an overvaluation bubble. Particularly, when you realize that most of the corporate earnings over the last few years have been driven by speculation, stock buybacks and a giant EQ/Debt/Liquidity bubble. At some point the P/E ratio will swing back to the other extreme and you won't want to be around when that happens. I gather that this time is fast approaching.

3. Economic data has been disappointing. The Citigroup Economic Surprise Index is at the lowest level since August 2011, and in that month, the S&P 500 dipped in a way that led some to think the economic cycle was turning.

I don't think the chart below needs any further comments. 

Macrodata

The strong dollar is hurting profits. "There is such a thing as too much of a good thing," Rosenberg wrote, and the dollar bull market is not over. He advised investors to avoid sectors that have EPS forecasts below zero, including Utilities (-6.6%) and Telecom (-0.8%.)

I tend to agree. Technicals suggest, at least for the time being, that the dollar rally will continue. I can only imagine how much this hurts multinationals when they report earnings in Q1-Q2. Despite hedging, very few anticipated the velocity of the dollar move over the last 4 months. I believe we will see the evidence of that soon.

In summary: The stock market is incredibly overpriced, by any measure. The economy is rolling over. Earnings multiples are high while the corporates are guiding down. Everyone is bullish and the strong dollar will have an adverse impact on earnings. Yet, I am supposed to believe that this bull market is just getting started, as most market pundits suggest? Again, you don't have to be a genius to figure out what happens next.

This conclusion is further supported by my mathematical and timing work. It clearly shows a severe bear market between 2015-2017. In fact, when it starts it will very quickly retrace most of the gains accrued over the last few years.  If you would be interested in learning when the bear market of 2015-2017 will start (to the day) and its internal composition, please CLICK HERE.

(***Please Note: A bear market might have started already, I am simply not disclosing this information. Due to my obligations to my Subscribers I am unable to provide you with more exact forecasts. In fact, I am being “Wishy Washy” at best with my FREE daily updates here. If you would be interested in exact forecasts, dates, times and precise daily coverage, please Click Here). Daily Stock Market Update. March 26th, 2015  InvestWithAlex.com

Did you enjoy this article? If so, please share our blog with your friends as we try to get traction. Gratitude!!!

The Secret Behind This Market Sell-Off  Google

Did The Dow Theory Just Confirm Trend Reversal?

For the Dow theory buffs out there. After a long period of distribution the Dow theory is confirming trend reversal. Thus far, it is a solid confirmation on the Dow Trasports and a marginal one on the Dow Jones. Nevertheless, I thought you should know.

Dow Transports

Z31

Did The Dow Theory Just Confirm Trend Reversal?  Google

Investment Wisdom Of The Day

peter lynch"You get recessions, you have stock market declines. If you don't understand that's going to happen, then you're not ready, you won't do well in the markets." - Peter Lynch

z33

Investment Wisdom Of The Day Google

Buy The Dips…BUY???

I often talk about how important investor psychology is. The videos below represent the mindset of most investors today. When every sell-off is viewed as a buying opportunity, despite today's extreme speculation and overvaluation levels, it might be time to adjust your expectations. Certainly be careful when someone tells you that the time to jump back in is NOW....after a relatively small 3 day correction.

z33

Buy The Dips...BUY??? Google