Written by Gary
Weekend Market Commentary For 05-31-2014
UPDATED: 0945 EST 2014-06-07
Last weekend I posted the bears story. This weekend the bulls have their say in various arguments that ‘prove’ they are in this for the long haul and the bears don’t have a chance. So far this past week seems to play out in the bulls favor despite the doom and gloom articles proliferating the headlining the financial web pages.
Jeffrey Dow Jones says, “I can’t imagine why anyone would still be uncertain about the stock market.” . . . and he may be right!
Jeffery goes on to say, “What I see has been and continues to be a fantastic environment in which to own stocks and all the technicals are flashing green . . . some important fundamentals look pretty good too.” Read his article, The Only Game in Town, HERE.
The bulls are claiming this bull market is here to stay and is, in fact, the only game in town, so sit back and enjoy.
Enjoy The Ongoing Secular Bull Market: Part I
Summary
Distinguish between secular and cyclical bull markets.
This cyclical bull market is the first phase of a secular bull market that will reach the 2020s.
Johnson and Johnson, and WalMart provide proof the bull market is secular.
One very consistent problem with Seeking Alpha authors (including yours truly! my mirror is working…) is our tendency to use a financial or technical phrase without carefully defining it. How many times have you read about a stock market “bubble?” Has anyone defined the term for general use, or in the article they wrote? Even Nobel Prize winner Robert Schiller didn’t do it here.
Another term often bandied about is “secular bull market.” What does this mean? Read More >>
I am not so sure earnings have been all that great as operating earnings FELL from $28.25 per share to $27.32 which translates into a quarterly decrease of 3.4%., but Mr. Overstreet thinks things are going to get a lot better.
He also states, “I think that there is no proof that QE is propping up the market. I remember that when QE began, the claim was that it would prop up gold and raise inflation, but that didn’t happen, so people pointed to stocks instead”.
Earnings Growth Suggests Things Will Get A Lot Better Before They Get Worse
Summary
By looking at the shape of earnings growth over the course of a business cycle, we can make predictions about future stock performance.
The history of earnings growth and the stock market indicates that medium-term returns are propelled by brief, reflexive, contrapuntal bursts in earnings.
Earnings grew nearly 800% in the twelve months ending in June 2010 after collapsing over 80% from their June 2008 levels.
If we can extrapolate from the history of earnings growth, we can estimate that the S&P 500 will roughly double by the end of the decade.
History also suggests that the gains could be disproportionately skewed to the 2014-2017 period.
Every reliable historical indicator that I have been studying for the last eighteen months suggests that this market (SPY,DIA,QQQ) continues to be biased to the upside.
In this article, I am going to argue that the history of one indicator, earnings growth, tells us that the market has much higher to go yet, roughly another 10% per annum until the decade is out (putting the S&P 500 near 4000 by 2021), but also that that growth may primarily come within the next three years. Read More >>
Mr. Wachtel writes a very good summary in the eyes of many analysts of where we are and what is in store for investors.
Lessons For The Coming Week And Beyond: What’s Behind The Rally And Headlines?
Summary
Technical Outlook: Modest upward momentum revives.
Fundamental Outlook, Near Term: Likely near term drivers behind the rally despite mixed data, longer term potential market movers on the horizon.
Fundamental Outlook, Longer Term: Longer term potential market movers on the horizon.
Cam Hui is without a doubt one of clearest thinkers in the financial world. He analyzes the markets and data with a keen eye and reports his opinions ‘fairly, honestly and in good faith’. One commenter wrote, “The bearish indicators you mention are far more convincing than the bullish indicators you mention.” Read the article and let me know what you think?
Correction, Interrupted
The analysis of financial markets has a low signal-to-noise ratio. Under those circumstances, good traders need to learn to admit when they were wrong and I am prepared to do that. Regular readers will know that I have been fairly cautious about the intermediate term outlook for U.S. equities and I have been calling for a correction this summer. However, with the SPX pushing to new highs last week. It’s time to throw in the towel on the correction scenario (as did Dennis Gartman and Ralph Acampora last week).
(Follow Closing Market Averages at end of this article)
Possible Fracking-Earthquake Link Could Challenge Oil And Gas Industry by Daniel Jennings
WTI oil closed Friday at 102.77 +0.28 (+0.28%)
The Demon The Gold Bears Are Mistakenly Overlooking
Gold closed Friday at 1253.30 0.00 (0.00%)
Copper Price Index Up, But Still In A Bear Market by MetalMiner
Copper closed Friday at 3.055 -0.035 (-1.14%)
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Friday’s Market Numbers
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Written by Gary
