The Week Ahead: Can the Market Earn Its Way?

July 21st, 2013
in contributors

by Jeff Miller, A Dash of Insight

In last week's prediction for the week ahead my streak I guessed that the main theme would be whether we had dodged the bullet on the matter of a correction. This proved to be pretty accurate, despite news about China, the Bernanke testimony, and some big earnings numbers.

This week we have very little economic data and the Fed members are finally taking some time off from the speech circuit. It is one of the two biggest weeks of the earnings season, so I expect that earnings will be the key focus.


Follow up:

Here are some perspectives to consider.

  • The Storytellers -- who can be of either the bullish or the bearish persuasion. The bears have emphasized the big misses in technology stocks. The bulls can point to strong reports from banks and health care companies. Anecdotal evidence is the raw material of confirmation bias, so watch out!
  • The Data-driven – who analyze all of the results. The story so far is that companies continue to beat expectations on earnings while missing on revenues. This is turning into a multi-year story. As we always do during earnings season, we pay special attention to the updates from the Bespoke Investment Group.


  • The Practical Forecasters. This group insists on looking beyond current revenue and earnings, emphasizing the outlook for company prospects. Nearly everyone following the earnings conference calls does this, but doing it for the market as a whole is almost a secret weapon. There is an excellent resource for looking beyond the current earnings reports, as I explain here.

I have some thoughts on the earnings season including a half-baked idea that I have never revealed before. I'll explain more in the conclusion. First, let us do our regular update of last week's news and data.

Background on "Weighing the Week Ahead"

There are many good lists of upcoming events. One source I regularly follow is the weekly calendar from For best results you need to select the date range from the calendar displayed on the site. You will be rewarded with a comprehensive list of data and events from all over the world. It takes a little practice, but it is worth it.

In contrast, I highlight a smaller group of events. My theme is an expert guess about what we will be watching on TV and reading in the mainstream media. It is a focus on what I think is important for my trading and client portfolios. Each week I consider the upcoming calendar and the current market, predicting the main theme we should expect. This step is an important part of my trading preparation and planning. It takes more hours than you can imagine.

My record is pretty good. If you review the list of titles it looks like a history of market concerns. Wrong! The thing to note is that I highlighted each topic the week before it grabbed the attention. I find it useful to reflect on the key theme for the week ahead, and I hope you will as well.

This is unlike my other articles at "A Dash" where I develop a focused, logical argument with supporting data on a single theme. Here I am simply sharing my conclusions. Sometimes these are topics that I have already written about, and others are on my agenda. I am putting the news in context.

Readers often disagree with my conclusions. Do not be bashful. Join in and comment about what we should expect in the days ahead. This weekly piece emphasizes my opinions about what is really important and how to put the news in context. I have had great success with my approach, but feel free to disagree. That is what makes a market!

Last Week's Data

Each week I break down events into good and bad. Often there is "ugly" and on rare occasion something really good. My working definition of "good" has two components:

  1. The news is market-friendly. Our personal policy preferences are not relevant for this test. And especially -- no politics.
  2. It is better than expectations.

The Good

This was a modicum of good news on the economic front.

  • Moody's upgraded the U.S. debt outlook from negative to stable. Is this really good news? Please note below the impact of government spending on the economy. Who elected these guys to a position that would influence public policy decisions?
  • The European story is better – more revenue, lower recession odds, and less threat to the world economy and US earnings. This is the story from Barron's. (Contrary view from Rebecca Wilder – and nice to see her writing again).
  • High yield spreads are narrowing again. Bespoke provides analysis and the great charts you expect, including this one:

High Yield Spreads 2013 071913

  • Initial jobless claims moved lower, back into the recent range. This is an important indicator but difficult to interpret on a weekly basis. Seasonal adjustments are difficult for such a short time frame, especially when you get into the "retooling" season for auto companies. Scott Grannis has an alternative look that emphasizes the unadjusted data. It is easy to see the general level of improvement.

Screen Shot 2013-07-18 at 8.24.35 AM

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