The Week Ahead: Should You Care About The "Bulls No.1 Lie?"

September 18, 2016 | September 2016 Bond Updates

Those that were frustrated by the stock market's narrow ranges during the summer got more than the bargained for in the past six trading days as the Spyder Trust (SPY) has traded in a wide range. The declines and the rallies have been brief as there have been two days of extreme A/D ratios. It does look as though most of the panic selling occurred on Friday September 9th. As I expected two weeks ago the Fed chatter has reached a fevered pitch as most analysts seem to be fixated on dissecting every Fed comment. The good news of course is that we will know their decision on Wednesday afternoon which is likely to shift the focus to the next earnings season. In a September 9th report Factset reported they are looking for a 2.0% decline in 3rd quarter earnings which is lower than their June 30th estimate of 0.4%. Since May I have been expecting that earnings would be better than estimated and that has been the case. Factset commented that for "Q2 2016, 70% of the companies in the S&P 500 reported earnings above the mean estimate and 53% of the companies in the S&P 500 reported sales above the mean estimate." I think that earnings are likely to again be stronger in the 3rd quarter which is based on my reading of the sentiment. This would break the negative trend of the past five quarters. Factset is looking for earnings growth of 5.8% in the 4th quarter of 2016 and they expect revenues to increase by 5.3%. Clearly a strong earnings season could be a powerful catalyst to push stocks higher in the 4th quarter.

View more at: http://www.forbes.com/sites/tomaspray/2016/09/17/the-week-ahead-should-you-care-about-the-bulls-no-1-lie/