The market opened with good news from Goldman Sachs, JP Morgan, and Johnson and Johnson. All reported solid earnings and in two cases, “blew away EPS and revenue estimates”. So far, earnings have pointed to solid. Then why is the market blue this morning? It is struggling to get out of the red and to find some footing in the green. At this moment, it does not appear committed to being in the red, but the day is young. Anyway back to my question – why so blue when earnings are coming in solid?
Me thinks the number one issue is the market does not trust itself. Although the S&P is floating below its all-time high by some 15 points, the Dow is, relatively speaking, much closer to its all-time high, and when the market is in this territory, bad news tends to bite harder and wariness tends to linger longer. The bears are ready to strike and the bulls are ready to charge, but neither will unless there is a clear advantage to do so. Mostly, the market hears a lot of growling and snorting with fake charges and paw strikes that catch mostly air.
The fact is the market is absorbing its current status and measuring its future potential. This is what the market does – it keeps one eye on the present and another on the future, say 6-9 months out. Today, it is taking in the good earnings news, but it does not have enough earnings yet to formulate a strong opinion for the future.
In the present, though, first and foremost, the market sees market tops, and when we have markets near or at the top, well, you know, we get the growling and snorting. We also get predictions based on limited data that does not consider the current fundamental context.
- The Dow is past the point where all possible standard time spans from 10/4/11 have expired. As for 11/25/11, all possible standard time spans from this low have expired except one; an extended basic advance (929-968 days). It forecasts a high in the time period from June 11 to July 20. July 20 is this Sunday which means if the 2009 bull market top wasn’t already seen on 7/3/14 then it should be expected this week.
I get it that there are a gazillion ways to view the market, but because my bias is toward the fundamental numbers, I don’t get many of the ways. The above is one. It is a Lindsay analysis (see George Lindsay) and if I understand it, it says that that we should expect the bull market that has been in place since 2009 to end this week. Now, I also understand from the above, that the earlier predicted time frames of the same bull market ending have “expired”. The timeframe we have now has one opportunity left to make the prediction come true – this Sunday.
I will be extremely surprised if the market top of July 3 is the end of this bull market. Why would it end? Is the economy faltering? Are earnings failing?
- The July 2014 Empire State Manufacturing Survey indicates that business conditions improved significantly for a third consecutive month for New York manufacturers. At 25.6, the headline index is the highest level in more than 4 years. This was well above the consensus for a reading of +16.8 and above last month’s reading of +19.28.
Sure, the market might struggle for a bit to bust through its current ceilings, as I said, but, hey, remember this is summer. We still have the autumn coming when all the players come back to work. If you want something other than a fundamental context, then look at charts of the last five autumns.
The market is now pushing toward green. The bulls are snorting back. The bears might end up with the edge for today, and if they do end up significantly on top today, as the bulls did yesterday, then we might look to the bad news biting harder premise I made earlier. We should not forget that in the present, the market also sees Ukraine fending off Russia, Israel and Hamas going at it, Iraq protecting its oil fields from theological nutcases, and Europe showing signs of recovery fatigue.
The market is also absorbing yet another negative news slant about the US retail sales for June.
- The headline U.S. Retail sales numbers for the month of June were disappointing for a third consecutive month as total sales rose by just +0.2%.The level was below the consensus estimate for an increase of +0.6% and was also below May’s revised level of +0.5% (from +0.3%).
Boo hoo! Retail sales did not meet expectations again (before the revisions, which will likely move them up, again). The fact is they are up, again, and that is what matters. But, in this snort and growl market, “bad news” tends to bite harder.
Trade in the day; invest in your life …
