"Investors were not ready to accept this bull market, and now they want to know when it's going to end, and the fact that so many people think it's over soon tells me there's one more  … .. Joe Zidle, Investment Strategist for the Blackstone Group
I can not agree with that: The first quarter is drawing to a close, in January the S & P rose 5.6%. followed by a stormy upturn from November to December, and now the bulls are looking forward to the end of March as the S & P has lost 6.8 %% since February 1. Since the beginning of the P now with a loss of 1
losing money, even if it is on paper, is very disturbing, but before we act, we leave think : investors have watched the value of their portfolio In the last In two months, everything has shrunk, it's just about what you've been doing for me lately, a way of thinking that can bring any investor into b's trouble. A simple change to the calendar has led to a significant difference in the stock market. In the 60 trading days before the peak of the S & P 500, there was not a single daily movement of 1%. In the 40 trading days since then there were 17. This fact alone has made the average investor very uncomfortable. That increases the stress.
When I say it's time to think let me clarify that. Thinking does not have to have preconceived ideas about politics, headlines, emotions, etc. This is hard to do, BUT it will only get in the way. When an investor is faced with difficult times, it is much better to become a cold, calculating individual.
First step: Go back and consider where the longer-term trend is. Watching daily action will only make the equation more frightening. Increase this long-term view in your mind, because until then there is a decided change, so it is now too early to make major portfolio changes. Of course, I'm talking to those who are investors, or at least 9 months to a year. The traders have their own worries to deal with.
Looking at the S & P 500, the current number of days above the 200-day moving average is 438 for the S & P 500. Bespoke Investment Group tells us:
There have been since the year 1928 only six previous streaks of 400 trading days or more, and there were 14 previous streaks of 300 trading days.
Despite all the volatility, the S & P tested this level of support and held it. The series is still in play at this moment. While it's something to watch, stopping and ending the series is no fatality. The 200-day moving average was hurt during this bull market and each time it did not end the long-term trend, no need to think about it.
It's always better to look at ALL the data and the ENTIRE situation around us, it's never black and white on the stock market. No one can accurately predict the future, but all we have to do is gather the data and gather it in an attempt to eliminate the odds in our favor. There are many pieces to shape the picture, and then put together a strategy. Look at the probabilities of specific events and situations, and then continue with information to keep going. So many are wrapped up with ONE piece of the puzzle that they become blind to everything else.
Investors can be like a pit bull when they get stuck in something they just never let go. That's fine, but you'd better be right. Wading through the investment world with a closed mindset will be a serious problem for your financial future.
No doubt, the recent volatility has led to a confused market situation. If it's confused, it may be best to do nothing. We observe that stocks start at point "A", go through a period of volatility and go back to point "A". Sitting and watching this price action will lead to overreaction and errors. Go back, let the headlines melt. This three-day weekend is a perfect time to do just that.
Ryan Detrick reports;
"It takes 20 months from the beginning to create an inverted yield curve until a recession sets in. It takes 32 months to go from 0.5% to the onset of a recession, but a flattening yield curve is a concern, but it does not mean it that a recession is imminent. "
This is an issue to watch, but we must not discard any other facts such as record earnings and earnings for the S & P 500 in 2018. Add multi-year highs in manufacturing and services and the likelihood of falling into recession next year seems to be low.
The Dallas Fed Manufacturing Index fell 15.8 points to 21.4 points in March from a rise of 3.8 points to 37.2 points in February as activity in the region slowed. This breaks a series of 3 monthly profits to the 12-year high of February. It is also below the average of 28.1 6 months.
The Richmond Fed Manufacturing Index fell 13 points to 15 points in March, returning the 14-point jump to 28 in February. The index has basically moved between 12 and 30 in the last 12 months.
The Chicago PMI fell another 4.5 points to 57.4 in March after falling 3.8 points to 61.9 in February. This is the third consecutive decline in the index, which declined from 67.8 in December (the highest since March 2011 at 68.8)
Consumer confidence declined to 127.7 in March but remains near highs. The February result was a 17-year high at 130.
Final read on Michigan Consumer sentiment is at 101.4 the highest since 2004.
Urban Carmel reminds everyone of a slowdown in relaxation. Private consumption, which accounts for 70% of GDP, remains at a real rate of 2.8% in the first two months of the year.
Source: Federal Reserve Economic Database
Initial jobless claims dropped in the last week of March to a 45-year low from 215k.
February Pending Home Sales Index rose 3.1% from the consensus of 3.0% for the month. Lawrence Yun, Chief Economist of the NAR,
"The real estate market has started differently so far in 2018. Contracts recovered in most areas in February, but profits were not large enough to keep up with last February's levels "This was the second highest in more than a decade, with the expanding economy and healthy labor market creating significant demand for home ownership, but the tiny number of offers on the market and their detrimental impact on affordability are pushing buyers and suppressing overall activity."
FactSet Research Weekly Report
Earnings Growth: For the first quarter of 2018, the estimated earnings growth rate for the S & P 500 is 17.3%. If 17.3% is the actual growth rate for the quarter, this will be the highest earnings growth since the first quarter of 2011 (19.5%).
Earnings revisions: As of December 31, the estimated earnings growth rate for the first quarter of 2018 was 11.4%. Ten sectors have higher growth rates today (compared to 31 December) as estimates, led by the energy sector, have been revised upwards.
Rating: The 12-month P / E for the S & P 500 is 16.1. This P / E is the 5-year average (16.1), but above the 10-year average (14.3).
In the first quarter, analysts increased earnings estimates for companies in the S & P 500 for the quarter. The Q1 bottom-up EPS estimate (which represents an aggregation of the average EPS estimates of all companies in the index) rose 5.4% over the period (to $ 36.24 from $ 34.37).
The first quarter of 2018 marked the largest increase in the bottom-up EPS estimate during a quarter since FactSet began to track the quarterly bottom-up EPS estimate in the second quarter of 2002. The previous record for the largest increase in the bottom-up EPS estimate was 4.8%
At that time, 105 companies in the index published the EPS forecast for the first quarter of 2018. Of these 105 companies, 52 published a negative EPS forecast and 53 a positive EPS forecast. The proportion of companies that give a negative EPS forecast is 50% (52 out of 105), well below the 5-year average of 74%.
If the final number of companies for the first quarter of 2016 provides a positive EPS forecast, there will be the highest number of S & P 500 companies that have posted positive EPS guidance since the first quarter since FactSet Guidance in the second quarter of 2006.
The political scene
I may be mistaken, but reading this headline from China on the semiconductor industry does not sound like a trade war on our doorstep.
Jeremy Zirin, Head of Investment Strategy at UBS Wealth Management Research; The announcement Thursday on tariffs on Chinese imports of up to $ 60 billion seemed to be on Not to be so bad, the economic impact of [the tariffs] is less than a tenth of 1 percent, it's actually quite bullish, what we heard yesterday are steel and aluminum tariffs as temp late, things were watered down and then taken back Looking at the overall economic backdrop, there is still a very good earnings momentum. "
The estimated impact of tariffs in 2018 is $ 36.5 billion. Compare this to the $ 800 billion expected in fiscal policy (tax cuts / spending / repatriation).
Please draw your own conclusions and proceed accordingly. I delivered an opinion on this topic last week. This reinforces this view.
The Fed, Interest Rates and Inflation
Core PCE, the favorite measure of inflation for the Fed, remains well below the target of 2%. Last week, it was 1.6%.
The broader story is that neither the Fed nor the central banks in other countries are in a hurry to accelerate tightening and quantitative tapering, not inflation, over-overs both overseas and the US shows data remains below 2%. Fed decision makers' reluctance to slow inflation as soon as it reaches 2% is rather a recognition that many believe that inflation has been below 2% for many years. This is bullish
Investor sentiment rose higher a while ago and many came to the conclusion that the euphoria was leveling off. The pessimism reached a seven-month high. Bullish sentiment fell 1.3 percentage points to 31.9%. The decline keeps optimism below its historical average of 38.5% for the sixth time in eight weeks.
Bearish sentiment rose 6.8 percentage points to 35.3%. The pessimism was last higher on September 7, 2017. The rise brings bearish sentiment above the historical average of 30.5% for the second time in the last 16 weeks.
Urban Carmel released this chart on the CNN Fear & Greed Index at 9. It is now lower than February 2016, lowest since September 2015.
Chart courtesy of Urban Carmel
A simple join the dots moment , Both periods marked S & P turning points, and corporate earnings did not improve as they are today.
Crude oil inventories rose 1.6 million barrels last week. Gasoline also fell 3.5 million barrels for the week. The price of WTI has remained stable. More consolidation before a run back to $ 70 may be in the cards. WTI closed the week at $ 64.91, down $ 1.03.
The technical picture
When the largest sectors have the most difficulty, it causes trouble. Technology and finance have fallen, health care, the third largest sector, is right behind them. Unlike other experts who call this downfall for the entire market, I believe that it can be just the opposite. First, let's use common sense. These sectors have outperformed. It is normal for them to return some of these profits now.
If they did not take that well-deserved break, the same experts calling for a crash would tell us that these sectors are in a bubble and ready to crash! So prices are going down and it's the prelude to a crash, but if they continue to rise, it's the same conclusion that stocks are going to crash. Convolute logic at work. It's also a sign that far too many have no patience to make any story or matter play.
One way to measure the long-term overall strength of the market is to watch the 200-day moving average resilience, anger begins to appear as these longer-term trends begin to flatten first and then overrun. We have seen a dent in the long-term overall view as the percentage of industry groups has dropped to 70.8% with rising 200 DMA.
That's less than in the middle of the 90 percent range earlier in the year. However, the percentage was quite high and lasted over 70%
. Take a look at where this data point was at its low in February 2016.
The daily survey of the S & P illustrates the "soil formation process".
Graph courtesy of FreeStockCharts.com
A low in February, then a renewed test that has been successful . Once we begin to see stabilization, EVERY progress that goes higher will encounter significant overhead resistance. Basically a continuation of the process to build a base. Volatility continued this week. It seemed that every rally was sold, every selloff was bought. This is common until the problem is solved in one way or another. I've noticed that buying and selling has this "programmed" look. It would not be surprising to see more sideward movement. Overhead resistance can be found at S & P 2,693. Support at 2,590, then 2,533.
The tech world is not coming to an end. Despite the recent weakness and comments on how bad the tech sector looks, the Nasdaq released its seventh consecutive quarter of positive results. Listening to the experts, one would think that the technology sector is in a bear market.
Urban Carmel published the following chart:
Courtesy of Urban Carmel
The illustration shows why I continue to believe that possession of gold over time not do much for me. I never thought you needed to have 5-10% gold in your possession.
Individual Stocks and Sectors
"Amazon (AMZN) Facebook (FB) has no end to the problems now, Google (NASDAQ: GOOG) may next With data issues, the semiconductors are selling off what? Trade Talk? The entire Nasdaq is weak, market leadership is gone, and the entire market is sure to start rolling now. So what's going to take the baton and drive the market forward? "" 19 19 19 19 19 19 19 19 AAAAAAAAAA A. Forget it, run as far as you can, it's utter nonsense, the FACT is the single stock mentioned, and the Nasdaq itself had big runs, so it's much better that they sell now Of course not, that would be a real problem. "What is quoted above is media, naysayers justify what is, in reality, quite normal price action after huge profits." The problem is, most of them they can I do not see what it is, a positive one.
Sometimes it's laughable, Amazon has risen 60% since November 2017. This is not a typo. If I go back, Amazon has gone up by 80% in the last 12 months. If I hear that the stock fell 5% that day and is extrapolated to be a precursor to a market downturn, that's absurd. Honestly, I can not use other words to describe what we hear today. I add that there is a precedent that indicates that the end of a correction is near when market leaders come under pressure.
Many say that you should now lighten the technology that should discharge. I do not agree. The bulk of earnings growth will take place in this sector. It's time to pick solid, fundamental stories that keep getting better with time. Old technology groups such as Intel (INTC), Cisco (NASDAQ: CSCO) and Microsoft (MSFT) reinvent themselves. Their stocks have broken out of multi-year trading ranges and their recent runs may just begin.
A market note that became apparent during the recent sell-off. The relationship between the consumer discretionary and consumer staples sectors. Institutions that run around the hills and become more defensive will offer the Staples and Shed the Discretionary. That was the case in 2007, before the S & P broke apart and rolled. So far we have not seen this at all.
The graphic above shows the sector view from March 22nd. Cyclical consumer goods are doing very well given the market weakness. Not so for the consumer goods. There is no hurry for the safety of this group. In conclusion, there seems to be no hurry to become excessively defensive to prepare for a recession or the beginning of a bear market.
IF this was a situation that looked like a complete breakdown of the indices, the institutions would NOT add cyclical consumer goods. Instead, they would add Consumer Staples, a Risk Offensive . The individual sector charts show how the Staples are sold and below average. While Discretionary surpasses the S & P, YTD. Very good news that this market weakness should NOT be a bit heavy.
The series of positive quarters for the S & P ended this week. Previously, the index had positive results for nine consecutive quarters, reaching back to the third quarter of 2015. A sign of strength, which in my opinion will not easily dissolve. But the general mood is now very cautious, if not bearish.
There is no playbook for stock market corrections. Every correction does not have to crash. However, this is a tough sell-through for investors watching the sharp swings we've seen recently on the stock markets. You could argue that we are now in a different market environment in which the bears are in control. On every single trading day, extreme sales seem to dominate in the final hours of trading, bringing the big indexes to a low.
When investors see their portfolio assets fall, panic ensues, panic adds to volatility, and the cycle keeps repeating. Until that changes, the butter production activity will continue. Any optimism that gets around now is drowned out, which makes investors reluctant to step in and take long-term positions. Uncertainties about tariffs, Fed policies, the White House upheavals, etc. are all guilty, and are now coming loud and clear to investors. This noise will certainly affect your decisions, ONLY if YOU allow it.
This environment will make it hard for rallies in individual sectors, industries and even stocks to get started. It is clear to anyone watching the charts of their individual positions. You see a very neutral image on most. Many stocks have decided to regroup like the indexes and take a breather. This is not a negative and no reason to abandon a trend.
Staying in a trading range is not the worst thing now. The winning season is around the corner, the economic data are choppy. That does not mean that there is a recession on the horizon. The latter has been the case in all other quarters in recent years. This is not earth-shattering news, and it should not mean slowing growth. The result image is the brightest we have seen in a few years.
Of course, it's best to leave all options on the table and continue without bias. Nobody can predict the future, believe it or not, that includes the naysayers. The game to play is easy. Ask yourself: WHAT IS THE POSSIBILITY OF an event or problem that really worries you? To put the hat on pure speculation, assumptions or a hypothesis is not the way to deal with money.
History has shown us how patience is rewarded. As frustrating as it may be, we can only wait for clearer evidence that the market is worrying where to go next. In my opinion, the preponderance of evidence favors the upside.
The long-term underlying trend is still in control. Strong corporate earnings and currently low investor expectations contribute to the positive outlook. While we wait for further hints, we have to assume that a trading range will continue until a definite move is shown that clarifies the situation to the investors. I see no reason to abandon the trend and the bull market, to stay the course.
to all readers who contribute to this forum to make this article better experience for all.
All the best for everyone!
Disclosure: I am / we are long CSCO, INTC, MSFT, FB, GOOG.
I wrote this article myself, and it expresses it from my own opinions. I do not receive any compensation for it (except from Alpha search). I have no business relationship with any company whose shares are mentioned in this article.
Additional disclosure: This article contains my views on the stock market and which positioning is convenient for me. Of course it is not suitable for everyone, there are far too many variables. Hopefully, it will generate ideas, add common sense to the complicated investment process, and make investors feel calmer and take control.
The opinions expressed here are just that – opinions – and may change at any time along with positions.
As always, I encourage readers to use common sense when managing ideas I want to share with the community. Nowhere does it mean that a supply should be bought and stowed until you die. Periodic reviews are mandatory to adapt to changes in the macro background that will take place over time.