I can safely say my pattern theory is dead. True, my up and down theory only lasted two days, but hey, one has to grasp at something these days. Alas, though, good-bye sweet dream …
So, the market waits anxiously for Operation Twist, then gets it, and then doesn’t like it. I mean really, folks, the details were out there. Everyone knew the target was the long end of the curve. As to the weakening economy, everyone also knew the Fed’s position on that as well. So what gives? Is it China’s sub 50 PMI reading, or is it more of the European debt malaise? Neither of these is new. China has been economically braking since last October and Europe, well that rumor machine has been running full tilt for over two years. Really, so what gives? Wait! I may have found the latest worries for the market.
- The next big round of corporate earnings reports doesn’t start for several weeks, but many analysts expect big corporations won’t be able to sustain the strong profits they have had for the last few quarters.
- The House of Representatives unexpectedly defeated a bill that would fund the federal government past September 30 on Wednesday as dozens of Republicans broke with their party to push for deeper spending cuts.
Surely both of these biggies are reasons for the market to swoon, aren’t they? Yet, again, neither is new. Predictions for the demise of quarterly earnings have been going on for the last six quarters or so, and the U.S. House of Representatives broke last year. Putting aside the dysfunctional House, what about corporate earnings coming up?
- Oracle Corp forecast earnings for the current quarter that are higher than expected, as well as robust software sales, offering some reassurance to investors hoping that global technology spending is holding up.
- General Mills affirmed its full-year outlook, saying it expects fiscal 2012 earnings of $2.59 to $2.61 per share,
Granted, given the global slowdown, I suspect many multinationals will earn less, but the two projections above point to earnings across a wide spectrum of economic activity. The technology and consumer staples sectors represent a huge portion of business spending and consumer spending. If nothing else, the projections suggest the global economy is not dead. So, I ask again, what gives? As I write, the DIJA is down 400, the largest drop in some time.
Frankly, I just don’t get it, which is nothing new either. No matter how much I study, when the market is running scared, it just does not act rationally. This reality is a constant, much like the North Star, the ebb and flow of the tides, the magnetic north pole. Hey, wait! When the bad news consistently trumps any good news, the market runs scared. Hmmm … Maybe I do get it …
Trade in the day – Invest in your life …
