Here is one way to put a happy spin on things. Wall Street is increasingly aware of the deceleration in corporate profits and a potential for the upcoming earnings season to be a rough one. This CNBC article dutifully notes these things, but the highlight is one sun shiny optimist who apparently thinks it may already be baked in.
“Obviously there’s a ton of concern… but my view is that expectations have come down rapidly, and there’s a clear understanding that we’re looking at a real weak environment right now from an earnings perspective,” said David Seaburg, head of equity sales trading with Cowen & Co.
“I think there could be an outside surprise that could carry this market higher, especially given that you have every central bank working to inflate asset prices.”
There you have it, “expectations have come down rapidly”. Surely this optimistic view that the worst may be behind us includes stock market valuations and prices that have adjusted…
Oh wait, never mind. ‘The worst’ never even got started.
So let’s keep it real and simply realize stocks have been bullish, the trends are up and there has been no discounting of decelerating corporate profits in stock prices. The market now decides between manic bubble making (defined here as an irrational separation from fundamentals, cooked up by policy though they have been) or a correction to get in line with said fundamentals.
Again, the theme has been that the US market was not over valued into 2nd half 2014 if one is willing to wear blinders to its dependence upon unconventional monetary policy. But if those fundamentals continue to degrade, the market will look conspicuous even to the densest, most conventional of the herd.
Another Scene From ‘Peak Fed': Dudley Signals ‘Go-Slow’ Approach
You see the humor of it all.
Policy makers’ shear predictability (good cops and bad cops always at the ready, with market events dictating which ones eat the mic at any given time. Or if you prefer the little clown car analogy, they drive to center ring, honk honk honk… and out they spill doing tricks and feats of daring do at every sensitive juncture when the market needs a little relief.
The hyper intense preoccupation the market (a collection of millions of decision makers and black boxes) has for the buttoned down eggheads, and its responses to each and every predictable Jawbone does not help people keep a handle on rational market management, but it is entertaining for now as long as you’re not positioned incorrectly (like long or short, ha ha ha).
It’s stupidly comical in the way it continues so predictably with people apparently still taking it seriously. Well, the mainstream media do, anyway. I guess they are not really people.
Dow down 100, ‘Fed may delay rate hike’ story gains steam, Dow up a 100. What’s the diff? At some point this skittish silliness is going to end and the market will choose a direction.
Here is what is actually happening. We are in a long and slow (and I mean slooooow) process of witnessing the zenith of confidence in the Fed (Peak Fed) as one day, even the dimmest, most sycophantic market participant is going to cotton on to the fact that these people are no more knowledgeable or in control than the rest of us (they just have a bigger bag and more tricks). Peak Fed → Confidence drains → Market gets about its business.
It’ll take patience though; sort of like how the ‘Peak Oil’ promotion took a long time to play out. By the way, consider ‘Peak Fed‘ as a © ™ of Biiwii.com. It’s a great theme, and it is happening in my opinion, right here and now. Best of all, it’s got very distinct investment themes going forward.
Back in the December to February time frame we had been noting a ‘swing’ market (swing baby, swing!) AKA a Whipsaw market AKA a market for nimble swing traders. There is no trend (on the daily time frame). What there was a few months ago was an extended period of fleeting hard ups and commensurate hard downs. So swing baby, swing!… but stay nimble. Today looks like one of those after the hard drop last week.
Market participants seem to literally be jerking to every piece of data or information that comes out. Strong Jobs = panic drop, FOMC lameness = rally, some middle east noise last week and mixed econ. data = drop, some China easing hype today = rally.
NFTRH’s latest US stock market rundown is posted at NFTRH.com if you want to check it out. Besides this fairly normal run through of important US markets, #336 had a lot to say about keeping perspective on the whole ball of wax.
I really feel like we have got our shit together, to put it as a I would put it in real life if you and I were just sitting and talking. And I’ve got all the patience in the world to boot. Not only for playing US stocks, but the precious metals (which I feel we have managed pretty close to flawlessly thus far, and much of the rest of the whole ball of wax).
Hint: Use real data and objectivity and keep ego and bias contained, tune out useless hype and it’ all going to work out just fine.
By Tom McClellan
No Bear Market Signal Yet From Housing
March 26, 2015
Before each of the really ugly bear markets of the past 30 years, there has been an important signal from housing data well ahead of time. We do not have such a signal now, and so that portends more upside in the months ahead for stock prices.
In fact, the past 3 months have seen a pretty substantial upsurge, especially in the Northeast and South regions of the USA as tracked by the Census Department. That takes the seasonally adjusted annual rate of new home sales to its highest level since February 2008. Generally speaking, seeing this home sales data make higher highs has been good news for the long-term path of stock prices. It is when the two diverge that problems start to develop.
Continue reading No Housing Bear Signal
Of course, at 2:01 US Eastern time the market could get very actionable, but for right now it is a ‘close to the vest’ market. This means no big bets and no strong leans in one direction or the other.
Everyone Hates US Stocks –Bloomberg
If that’s true, that ain’t bearish.
Hedge Funder Dalio Thinks the Fed Can Repeat 1937 All Over Again –Bloomberg
I researched this gentleman and I love what he is all about, philosophically and in the way he views life as it relates to his vocation in the markets. i.e. it’s not just some MSM b/s. He is to be taken seriously IMO, in his knowledge of the markets but even more, as a respectable human (something lacking in this sphere, again IMO).
So here is the Fed’s idiotic Dot Plot that we are all supposed to be transfixed by.
The stock market took a hit, bounced and now by my eye anyway, is not at all cut and dry. Sentiment became toxic to the over bullish side a couple of weeks ago. Then the market dropped and bounced. This should not be an end to the downturn given the former sentiment profile that has not been nearly fixed yet.
But the leadership items we follow (esp. Biotech, Small Caps and Banks) are stable to good and then there are the AAII Individual Investors having been spooked, which is short-term positive (though the longer-term trend is over bullish and so, not healthy).
There’s lots more to the picture that can’t make it into a simple post. But it is best to check assumptions at the door and let’s all just be prepared for what is on the other side. It’s not so much the FOMC I am concerned about as my fellow market participants. That’s why I have remained in a comfortable position and recommended the same in NFTRH. It’s the ‘no strong leans’ market at the moment.