Posts Tagged ‘S&P 500’
Is Now the Time to Ditch Gold or Buy More?
By George Leong, B.Comm. for Profit Confidential
As many of you know, I’m not keen on the near-term prospects for gold at this juncture. The metal, while still viewed as a safe haven for some, is no longer on my buy list.
Yes, central banks are buying gold, but so what? The supply of the yellow ore continues to be ample, and demand really doesn’t appear to be doing anything.
In mid-April, I was bearish on gold when it traded at around $1,480–$1,500 an ounce. (Read “Is Gold’s Near-Death Crisis Over-Exaggerated? Concerns of a Market Meltdown May Not Be.”) And here we are two months later and the spot price is down 6.5%, while the S&P 500 has gone up about 3.7% during the same time.
Now I’m not saying that I would never be a buyer; I just wouldn’t be buying at this time, due to tough resistance and selling on upside moves, based on my technical analysis.
Take a look at the chart below. The first thing you’ll notice is the presence of a firm bearish “death cross” since late February, when the 50-day moving average (as shown by the blue line) crossed below the 200-day moving average (as reflected by the red line). Since the initial move, the gap between the two moving averages has widened and gold prices are trending lower.
Chart courtesy of www.StockCharts.com
The next developments you will notice on the chart above are the two successive descending triangles characterized by lower subsequent highs.
The first descending triangle materialized between early February and early April, prior to gold tanking on the chart, falling below $1,350. We are now in … Read More
Truth Behind 1Q 2013 Earnings and What’s Next for Stocks
By Michael Lombardi, MBA for Profit Confidential
This shouldn’t be a surprise to the readers of Profit Confidential.
According to an analysis done last week by the Wall Street Journal, in the first quarter of 2013, corporate earnings growth of companies in the key stock indices like the S&P 500 wasn’t really due to companies doing better. Rather, “research tax breaks” are what pushed 1Q13 earnings up for many S&P 500 companies. (Source: Wall Street Journal, June 14, 2013.)
Consider Intel Corporation (NASDAQ/INTC). The company spent $10.1 billion on research and development, which essentially lowered its effective tax rate from 28.2% in the first quarter of 2012 to 16.3% in the first quarter of 2013! This bolstered Intel’s corporate earnings.
Other big names in the S&P 500 like Google Inc. (NASDAQ/GOOG), Abbott Laboratories (NYSE/ABT), The Boeing Company (NYSE/BA), Yahoo! Inc. (NASDAQ/YHOO), and Xerox Corporation (NYSE/XRX) were able to use “research tax breaks” to also boost their corporate earnings.
While this technique helped companies boost 1Q13 earnings, profit expectations aren’t so rosy going forward.
Expectations for corporate earnings for the S&P 500 companies continue to drop. At the end of the first quarter (March 31), second-quarter corporate earnings were forecasted to grow at 4.5%. Now, corporate earnings growth for the second quarter is estimated to be only 1.3%. (Source: FactSet, June 7, 2013.)
Only four out of 10 industry sectors in the S&P 500 are expected to show corporate earnings growth in 2Q13. The information technology sector of the S&P 500 is expected to report a decline of 6.3% in corporate earnings this quarter and the health care sector could see its profits slide four percent!… Read More
Wine, Steak, and the State of the U.S. Stock Market
By George Leong, B.Comm. for Profit Confidential
I was recently out to dinner with a friend who manages tens of millions of dollars in private equity. While the Dow and the S&P 500 are still within two to three percent of their recent highs, my friend is not happy. In fact, he is kind of disappointed with the current trading action in the stock market.
As we move along into our discussion and dinner, I was really not surprised to hear that he was disappointed by the lack of a pullback in the stock market.
The S&P 500 was down five percent a few weeks back. At that point, I was hoping for a more sustained pullback; just like my friend, I had cash around and was ready to pounce on a buying opportunity in the stock market that subsequently really never materialized.
I could have accumulated on the five-percent adjustment, but my feeling was that there was more to come and there would be a bigger sale on Wall Street. (Read “Bull Market Not Over, but a Correction May Be on the Horizon.”)
The current 23% correction in the Nikkei 225 would be ideal here, but I doubt that will happen, as the Japanese stock market was way overextended and due for a setback.
When I asked my friend what kind of adjustment he was looking for, to my surprise, he responded that he was not really sure and would need to evaluate the situation at that time.
Yet by the time our second bottle of wine arrived, he was more open to questions; he suggested he would need to see a correction … Read More
Number of S&P 500 Companies Reporting Negative Guidance a Red Flag
By Michael Lombardi, MBA for Profit Confidential
Standard & Poor’s, the credit rating agency, believes the likelihood of the U.S. credit rating being downgraded in the near term is less than 33% (one in three) and it has decided to keep its credit rating on the U.S. economy at AA+, slightly lower than the best investment grade. (Source: Standards & Poor’s, June 10, 2013.)
This may be good news to the politicians who continue to believe there is an economic recovery in the U.S. economy, but it’s not enough to convince me.
In March, 47.7 million Americans, or 23.1 million households, were on some form of food stamps in the U.S. economy. (Source: United States Department of Agriculture, June 7, 2013.) This is more than 15% of the U.S. population.
And instead of people moving away from the government’s help, as would be the case during economic growth and a recovery, dependence on the government is actually increasing. Food stamp use in the U.S. economy was lower at 44.5 million in March of 2011.
Economic growth in the U.S. economy means job creation and consumers increasing spending—we have the exact opposite today.
After 2009, we had a sense of economic growth in the U.S. economy as demand in the global economy meant many multinational American companies were able to sell their goods for a profit outside the U.S. But as the global economy struggles now, it’s a different story.
For the second quarter of 2013, 116 companies in the S&P 500 have provided corporate earnings guidance; 93 of them have provided negative guidance. The ratio of companies providing negative guidance compared to companies providing positive guidance has … Read More
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