Financial Markets All is Quiet
Stock-Markets / Financial Markets 2016 Sep 06, 2016 - 03:07 PM GMT
It has been a very quiet weekend. The SPX Premarket is mildly positive as I write. The market is basically directionless.
ZeroHedge writes, “The return from summer holidays has started in much the same way as we left off August, with another subdued session that has seen European stocks little changed, Asian shares advance and S&P futures are modestly in the green amid a flurry of M&A. The US dollar weakened, with the Bloomberg Dollar Index down 0.2% for the 2nd day in a row as prospects for a U.S. interest-rate hike this month remained subdued.”
Morgan Stanley’s Adam Parker has thrown in the towel and turned bullish again. He states, “
This call option on EPS growth relative to low expectations today we think offers more attractive risk-reward than most other major asset classes. We left our base case EPS for the S&P500 unchanged, but raised our price-to-earnings assumption from 17x to 17.7x. For our bear case, we raised our EPS assumption from $100 to $106.9 two years out, viewing the flat EPS so far this year as a relative positive, implying that the acute drop-off factored into our prior bear case as increasingly unlikely. We are raising our bear case multiple from 16x to 16.8x. For the bull case, we are leaving our EPS essentially unchanged, moving the out year from $137.1 down to $136.5, but raising our bull case multiple from 18x to 19x, yielding our new 2500 bull case forecast.”
ZeroHedge points out, however, that earnings have been decreasing dramatically, contrary to Parker’s assumptions. It reports, “From June 30 through August 31, the value of the index increased by 3.4% (to 2170.95 from 2098.86). This quarter marked the 16th time in the past 20 quarters in which the bottom-up EPS estimate decreased during the first two months of the quarter while the value of the index increased during the first two months of the quarter.
The blended earnings decline for Q2 2016 is -3.2% (with 2 companies yet to report). The second quarter marked the first time the index has seen five consecutive quarters of year-over-year declines in earnings since Q3 2008 through Q3 2009.”
TNX is increasingly overdue for a Master Cycle low. It is now eleven days beyond the average 258 day term, so it is stretched. This suggests that the all-time low may have been made on July 8 instead of being due now. The Cycles Model suggests a decline to Cycle Bottom support at 13.42, but considering the shortness of time, it may not go that far.
This morning’s action in Crude suggests that the decline may not be over yet. While it hasn’t taken out last week’s low at 43.00, it has the potential to do so. The Master cycle low is also overdue in crude, so we may see some resolution rather quickly.
Regards,
Tony
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