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Despite the sluggishness, non-financial components are expected to show earnings growth of 10.8 percent. The financial components are expected to show devastating declines yet again, with analysts predicting a decline of 47.7 percent from the sector. Overall, this would lead to an overall earnings decline for the fourth straight quarter. Here is how I see things playing out over the next six weeks or so. Due to the extreme number of stocks that are oversold right now, I can see the indexes rallying this week and perhaps even early next week. This would be enough to get most of the stocks out of oversold territory. The problem is the long-term trend is still to the downside. The bearish crossover of the 10-month and 20-month moving averages on the S&P that I pointed out in last week’s article is just getting started. I look for a mild rally over the next week or so, and then when the earnings start rolling and falling short of expectations, the selling will resume. Not all companies will get hit, as some will beat expectations and some will rally because the expectations are so low that they can’t help but go up. Overall, I look for earnings to disappoint as a whole and the low from March on the S&P will be taken out over the summer. Historically, over 60 percent of companies beat their earnings expectations. In Q1, only 48 percent beat expectations. I would expect more of the same this quarter. As we all know, earnings season is all about expectations, and right now, it seems that the expectations are for the financials to do poorly, but all other sectors will grow at a double-digit pace. I just can’t see that happening with the employment picture looking like it does and the housing market being the worst that it has been in 25 or 30 years. Add to that the abysmal consumer confidence numbers, and I just don’t see companies growing their earnings by ten percent or more. Good luck and good trading, P.S. To let me know what you thought of today's article, send an e-mail to: feedback@investorsdailyedge.com. [Ed. Note: Subscribers to Rick’s KISS Investing service recently closed out gains of approximately 150% on Continental Airlines and 175% on the Diamonds Trust. Click here to learn more about KISS Investing]
Light Economic Calendar, |
Date | Time (ET) | Statistic | For | Market Expects | Prior |
8-Jul | 10:00 AM | Pending Home Sales | May | -3.00% | 6.30% |
8-Jul | 10:00 AM | Wholesale Inventories | May | 0.70% | 1.30% |
8-Jul | 3:00 PM | Consumer Credit | May | $7.0B | $8.9B |
11-Jul | 8:30 AM | Export Prices ex-ag. | Jun | NA | 0.40% |
11-Jul | 8:30 AM | Import Prices ex-oil | Jun | NA | 0.50% |
11-Jul | 8:30 AM | Trade Balance | May | -$62.1B | -$60.9B |
11-Jul | 10:00 AM | Mich Sentiment-Prel. | Jul | 56 | 56.4 |
11-Jul | 2:00 PM | Treasury Budget | Jun | $36.5B | $27.5B |
INTERNAL ENDORSEMENT
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