Street’s Algorithms Ignoring Earnings ?

Investor’s first read – Daily edge before the open
S&P 500:2,027
Nasdaq Comp.:4,763
Russell 2000: 1,074
Thursday: March 17, 2016 8:45 a.m.
This is a big week for reports on the economy. Today – Thursday: Jobless Claims, Philly Fed Business Outlook (8:30), JOLTS and Leading Indicators (10:00); Friday: Consumer Sentiment (10:00).
As expected, the Fed did not bump rates yesterday, and indicated 2016 would involve two bumps instead of originally planned four. It was the latter that caused the market to rally in late trading.
Note: Fed speakers Friday: Dudley (9:00), Rosengren (11:00), and Bullard (3:00) Note: Bullard tends to be a “market mover !” (and I think he enjoys the role).
EARNINGS ( Who cares ? No one – yet !)’s Patrick J. O’Hare called attention to a little known (appreciated) projection by S&P Capital I.Q. for 2016 earnings. S&P now projects earnings for S&P 500 this year to grow 1.7% vs. its January target of plus 7.4% . Q1 earnings are now projected to be down 6.8% from January’s projection of plus 1.2%. Q2 are projected at minus 2.0%.
If this is the case, the S&P 500, just 5.2% off its all-time high, is vulnerable to a serious correction.
Current levels of many stocks are not supported by fundamentals. Much of the gain since mid-February can be attributed to a normal bounce from an oversold condition, corporate stock repurchases, as well as a rebound in oil prices.
Much of the investment decision process today is driven by computer algorithms, which results in robotic momentum – up, and down.
It doesn’t appear the computers are responding to earnings projections “yet,” but they will next month when Q1 reports flow in and guidance and projections for Q2, Q3 and Q4 hit the Street.
If the Street is jolted by reports and projections, the computers will then march to that drummer, just like it has responded to oil prices in recent months, the Fed before that, etc. until a new drummer takes over.
Odds still favor a turndown in April, unless unexpected news triggers a break.
SUPPORT ‘today”: DJIA:17,2772,021; S&P 500:; Nasdaq Comp.:4,752.
RESISTANCE : “today”: DJIA:17,436; S&P 500:2,038; Nasdaq Comp.:4,796.
On occasion, I technically analyze each of the 30 DJIA stocks for a reasonable risk, a more extreme risk, and an upside potential over the near-term. I add the results of each, then divide by the new DJIA “divisor” (0.14602) to get the DJIA for those levels. This gives me an internal check on the DJIA itself, especially if certain higher priced stocks are distorting the averages,
As of March 11, 2016, a reasonable risk is 17,073 a more extreme risk is 16,970. Near-term upside potential is 17,586
 STATUS OF MARKET: Neutral – but vulnerable. Expect volatility
 OPPORTUNITY: RISK: Risk high, Profit taking justified.
 CASH RESERVE: 25% – 45%. Consider 75% now
 KEY FACTORS: Outlook for Q1, and 2016 earnings questionable.
Note: Source of economic data
For a weekly economic calendar and good recap of indicators, go to
George Brooks
Investor’s first read
A Game-On Analysis, LLC publication
Investor’s first read, is a Game-On Analysis, LLC publication for which George Brooks is sole owner, manager and writer. Neither Game-On Analysis, LLC, nor George Brooks is registered as an investment advisor. Ideas expressed herein are the opinions of the writer, are for informational purposes, and are not to serve as the sole basis for any investment decision. References to specific securities should not be construed as particularized or as investment advice as recommendations that you or any investors purchase or sell these securities on their own account. Readers are expected to assume full responsibility for conducting their own research pursuant to investment in keeping with their tolerance for risk.

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