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Here Comes Earnings Season: Brace For A Slowdown In Growth

FYI: A slowdown in corporate earnings growth is particularly worrisome to skeptics of the stock market’s relentless rise to record after record this year.


  • Worried about it?

    I am HOPEFUL for it!
  • Howdy folks,

    So the forward earnings game is still own. Folks, the earning numbers that the press reports are top line estimates. The real number (from my perspective) is "as reported" or TTM and this is what companies actually take to the bottom line. For full year 2017 TTM is estimated at $114.90 as of 09/29/2017 by S&P. Full year 2017 top line forward estimates were in the $135.00 range not long ago. It sure is real confusing these earnings numbers and that is why Old_Skeet uses a blended number of forward estimates in conjunction with TTM. The number I am using in the barometer is $122.50 through 3rd quarter and $125.00 for 4th quarter ending.

    Let's see, 20 X $122.50 = 2450. For me 2450 is the fair value number for the S&P 500 Index as we closed out the 3rd quarter by my mytholodgy. And, 2500 would be the fair value number for 4th quarter ending. With this, the earnings feed in the barometer indicates for the S&P 500 Index is currently at a 2.2% premium. Please know, there are other feeds used in the barometer beside earnings to produce its current reading of 135 which indicates that the Index is currently trading at about a ten percent premium putting it currently at the top of the overvalued scale. Next upward stop is overbought. In addition, to the earnings feed there is a breadth feed and a technical score feed which is also derived from a blended numbers coming from the RSI and MFI technicals. The breadth feed comes from the number of stocks in the Index that are above their 200 moving average. Then there is a short interest feed that has not been spoken much about until now.

    In short words, the higher short interest moves the higher the barometer reading moves. Since short interest is currently at about 2.8 days to cover the barometer reading is currently a little higher than it normally would be without this feed.

    Old_Skeet's market barometer is a neat way for me to measure the Index because it blends many inputs into a single reading that has been scaled.

    In my book ... Stocks are Currently Richly Priced! And, with this, have outpaced earnings.

    And, so-it-goes.
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