Half Way Through Earnings

by Jay Pestrichelli on April 29th, 2013

There was a great graphic in The WallStreet Journal this mornig that outlines how at the earnings half-way mark EPS and revenue have been less than stellar.
Click here for the article

The charts above shows revenue for Q1 2013 to be down 0.3% year-over-year and EPS up only 3.8%.
The article is filled with examples of revenue disappointments from the season to date and puts a lot of the blame on a slowdown in Europe. As 20% of sales for S&P 500 companies come from that side of the pond, it makes sense to watch for their lower spending as a fundamental reason to sit out of equities.
However the technical show a different story. The mid to long-term indicators show little reason for concern. The market is well north of its 200 day moving average and despite bumping up against new highs, RSI show no signs of an overbought scenario. Since September, the market has put in a series of higher highs and higher lows, which is the hallmark of an upward trend market. See the 2 year chart below.
What does the seeming contradiction of the technical and fundamental indicators tell us? At Buy and Hedge we use fundamentals to tell us why to be in the market and occasionally use the technicals to tell us when to sell.  Which means right now for us, this data says there is little reason to buy, but nothing telling us now is the time to sell either.   

Decide for yourself, but we continue to stay invested for the long-term trend and hedge to protect if/when the market finally decides that the lack of corporate outperformance means it’s time to cash out.

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