Month: August 2013

By Profit Confidential

Geopolitical events are overtaking the stock market’s near-term trading action, which was all about speculation over the Federal Reserve and what Chairman Ben Bernanke will do regarding quantitative easing.

Based on what transpires in Syria, the equity market is ripe for more declines; realistically, the stock market has been extremely lofty this year, considering the economic news and the prospects of reduced monetary stimulus.

Confirming the overly positive disposition of the stock market has been the performance of the NASDAQ Composite Index, which previously lagged behind the Dow Jones Industrial Average until it recently confirmed the market’s uptrend.

Over the last 12 months, the Russell 2000 index has been the strongest of the main stock market indices. This is a classic secular bull market indicator, but everything’s been turning downward this week.

Obviously, geopolitical events skew the certainty the capital markets crave. Second-quarter earnings season was underwhelming, with the exception of balance sheets, which continue to be top-notch for most Dow Jones components.

Looking at the equity market constructively, many of its leading blue chips were very strong until the beginning of August. Then speculation about the potential reduction in quantitative easing and monetary stimulus, in general, took the froth out of some of these leading positions, including Johnson & Johnson (JNJ) and PepsiCo, Inc. (PEP).

I repeat my view that there is very little action to take in this market, particularly as it pertains to long-term blue-chip investors. The stock market has come off a very large uptrend in a short period of time, and it’s been due for a full-blown, material correction for a number of months now.

In terms of risk capital, the biotechnology sector continues to offer some of the strongest returns. (See “Old Adage of ‘Don’t Fight the Fed’ Stands, but Big-Cap Earnings Uninspiring.”)

With all the geopolitical events transpiring and the positive disposition speculators have for oil prices, small- and mid-cap oil and gas stocks have been appreciating nicely. This is a specific stock market sector with more legs this year. Big oil continues to have production problems.

But this is very much a market that isn’t for sowing new positions. Prices have moved so much since the beginning of the year with very modest earnings growth that in a prolonged period of falling share prices would be normal trading action.

Near-term, geopolitical events rule capital markets. But the Federal Reserve’s actions later in September will still solidify the stock market’s year-end disposition.

Followed by third-quarter earnings, there is a lot of uncertainty on the horizon. From my perspective, tolerance for investment risk is on the decline. The stock market has been extremely resilient this year. It is a leading indicator and is very much ahead of Main Street.

The action is in capital markets, and reflation continues. The velocity of money is beginning to gather a little strength. The reflation of asset prices remains the current reality.

Article by profitconfidential.com

By Profit Confidential

Syria is on the verge of expanding its current conflict to include the United States and its allies as the chaos in the Middle East continues. Then there are also the tensions in Egypt and Iran.

If the U.S. and its allies attack Syria, the impact on the global economy and the stock market will be negative and how bad it gets will largely be dependent on the degree and length of the war.

We are already seeing what’s happening in the market. Oil prices have been rising, especially Brent crude, due to the obvious impact the escalation of a war would have on oil flow.

The chart below of the spot price of Brent crude oil shows the breakout at the $110.00 level.

Chart courtesy of www.StockCharts.com

So, you have Iran and Iraq as neighbors of Syria. While both are not part of the Organization of the Petroleum Exporting Countries (OPEC), there will still clearly be a disruption to the oil flow, especially to Europe and Asia.

If you are an active trader, you should look at either buying oil-based exchange-traded funds (ETFs) or oil futures, or playing the market via leveraged call options on oil. Either way, money will be made if a war surfaces—just think back to what happened in Iraq.

Of course, with higher oil prices comes a major hike in gasoline prices. But that’s clearly not what we want to see at this time, given the lack of consumer spending that America needs to drive its gross domestic product (GDP) growth.

The one thing is that should the situation in Syria escalate, the Federal Reserve may hold off on tapering until October or December. Failure to do so could weaken the U.S. economy.

The second money-maker in the case of an outbreak in Syria is gold, which has already been surging higher as capital rotates away from equities and into the safety of gold.

Note the pop in the chart below and the uptrend since a bullish double-bottom formation in July, based on my technical analysis.

Chart courtesy of www.StockCharts.com

Yet in both the case of oil and gold, I view the buying opportunity at this time as a trading strategy, and not a shift in the commodities’ underlying fundamentals. If nothing happens in Syria, I doubt gold and oil will hold or move higher. (Read “Yes, We’re Bullish on Gold, But Here’s One Bear’s Case Worth Reading.”)

With this in mind, I wouldn’t be going out and accumulating gold mining or oil exploration stocks if the Syrian crisis intensifies.

Rather, I would trade the underlying commodity in gold and oil via options, futures, or ETFs; I’d avoid stocks, however, since there is a tighter correlation between the actual commodity and prices.

Article by profitconfidential.com

Source: Zig Lambo of The Energy Report (8/29/13)

http://www.theenergyreport.com/pub/na/micro-cap-oil-stocks-that-hit-the-jackpot-phil-juskowicz

If you want the most bang for your buck, quality E&P micro caps are the way to go. At least that’s the opinion of Analyst Phil Juskowicz of Casimir Capital, an early follower of a company that ended up discovering the Barnett Shale. In this interview with The Energy Report, Juskowicz explains his investment rationale and talks about several of his favorite micro caps, including one that went shopping at an asset bankruptcy sale and absolutely cleaned up.

The Energy Report: With oil prices firming up over the past couple of months and the spread between West Texas Intermediate (WTI) and Brent Crude narrowing, what are your price expectations for the remainder of 2013 and into next year?

Phil Juskowicz: While I don’t spend a lot of time predicting commodity prices, I personally see relatively stable short-term oil prices. Intermediate or long-term prices may weaken, assuming no supply disruptions arise from political upheavals, while gas prices may strengthen based on supply/demand fundamentals. We’ve seen continued oil supply growth and the short term market seems to be pretty range bound, having developed a good base around the $100 per barrel ($100/bbl) level.

TER: Where do you see some of the best investment opportunities in the oil and gas business?

PJ: Micro-cap exploration and production (E&P) stocks have severely underperformed the S&P Small Cap E&P Index since the second half of 2011 (H2/11). However, the definition of “small cap” depends on who you’re talking to. The Small Cap E&P Index consists of companies around the billion-dollar range like Approach Resources Inc. (AREX:NASDAQ) and Northern Oil & Gas Inc. (NOG:NYSE). Casimir has a micro-cap E&P index, which is comprised of companies with market caps up to $500 million ($500M) with some names under $100M. That index level started to diverge in H2/11. Both of these groups consist of relatively equal gas/oil weightings, so the performance should not, in our opinion, be attributed to the relative strength of oil prices over gas that commenced around that time. As a result, we believe that there are attractive investment opportunities in the micro-cap E&P universe.

Casimir Micro-Cap E&P Index (White) vs. S&P Small-Cap E&P Index (Yellow)

Casimir Micro-Cap E&P Index composed of: AMZG, ANFC, CAK, CPE, CXPO, EGY, EEG, ENRJ, ENSV, FEEC, FXEN, GMET, GNE, HDY, HNR, IFNY, IVAN, LEI, MCEP, MILL, MPET, MPO, OEDV, PHX, PNRG, PSTR, RDMP, SARA, SSN, STTX, TAT, TENG, TGC, TPLM, USEG, WRES, ZAZA

Source: Bloomberg; Casimir Capital

TER: How do you choose the companies in your coverage list?

PJ: We look for small companies that have largely flown “under the radar screen” and are underfollowed. The companies we cover have strong management teams and operate in premier areas with good assets that have substantial cash flow potential.

TER: Do you cover any service companies?

PJ: Enservco Corp. (OTCBB:ENSV) is on our “watch list”. The company is the only nationwide provider of hot oiling, well acidizing and frack heating services generally used to coax oil out of the ground, for example to counter paraffin buildups. Enservco experienced healthy margins in Q2/13 despite it typically being a seasonally weak time for heating services. The company continues having to turn customers away in some areas while it builds out its fleet. Management, in our opinion, has a track record of building successful companies and its regional staff has strong relationships with E&Ps. The company is also expanding into other basins and successfully tapping into new revenue sources.

TER: Why aren’t competitors seeing the opportunity here and moving in to get a piece of the action?

PJ: There are regional pockets of mom and pop shops that will do some of these services, but, a nationwide company like a Noble Energy Inc. (NBL:NYSE) might turn to Enservco because it already has a reliable relationship with Enservco’s staff in different areas. Enservco’s services account for a very low percentage of total well drilling and completion costs (it might cost around $100,000 to service a $7M well) so customers are not as likely to conduct competitive bidding processes. Instead, they choose to use a company with which the frontline managers already have existing relationships.

TER: So it has developed a national reputation, which is its competitive strength.

PJ: And it’s building out the capacity as we speak. Enservco is expanding its already large presence in the Marcellus Formation. In its Q2/13 conference call, management said they were starting to see the Utica play out a little bit. The Utica underlies the Marcellus in a lot of areas and Enservco gets some economics of scale there. [See map] Furthermore, management has been getting the word out more and also may be contemplating a reverse stock split and listing on another exchange.

Source: Marcellus Coalition

TER: What E&P names on your coverage list look interesting?

PJ: We like Miller Energy Resources (MILL:NYSE; MILL:NASDAQ), which, in late 2009, captured former Pacific Energy Resources Ltd. assets out of bankruptcy that were valued at $500M for an outstanding $4.5M. Miller’s entire enterprise value, meanwhile, is just $240M. Moreover, its infrastructure assets were valued by third parties on behalf of its lender at $190M. What makes these assets most attractive is the fact that recent well results indicate that original estimates by Forest Oil (which sold the properties to Pacific in 2007) may in fact be correct, which would mean that these Alaskan assets could contain 100–200 million barrels (MMbbl) of recoverable oil reserves. Proved oil reserves presently stand at 8.61 MMbbl.

TER: How was Miller able to buy $500M worth of assets for less than 1% of their value? Even in bankruptcy, you’d think that there’d be buyers willing to pay more than that.

PJ: David Hall, a Miller Energy executive who had worked on the assets even before Pacific bought them from Forest Oil in 2007, was following the Alaskan bankruptcy proceedings. He got in touch with the CEO of Miller, Scott Boruff, and told him about these assets that were becoming available.

TER: Why does Miller believe that the original estimates of recoverable oil reserves may, in fact, be correct?

PJ: The thesis is that Forest Oil used the wrong completion techniques, which is why well performances had dropped off. The completion techniques Forest Oil used were in fact different from techniques used for other assets on the McArthur Trend. David Hall believed that workovers on existing wells, for example, replacing some electric submersible pumps and making changes to completion techniques on new wells, could improve production. Low and behold, that’s exactly what’s happened.

In addition, Miller just started doing sidetracks of some of these old wells. It posted a 21-day production test of its RU-2A well several weeks ago at 1,314 barrels per day, which would indicate that that the oil’s there and it’s recoverable. Management has been doing a good job of utilizing preferred equity to have substantial capital expenditure programs without diluting the common shareholders. To top it off, it has about 600,000 undeveloped acres that it’s just starting exploration on as well.

TER: What other names look interesting?

PJ: I like Trans Energy Inc. (TENG:OTCBB), which is a pure play in the Marcellus Shale. The company holds about 20,000 net acres in the Marcellus, a substantial portion of which are in the core, liquids-rich part of the play. Operators, including Range Resources Corp. (RRC:NYSE), EQT Corp. (EQT:NYSE) and Gastar Exploration Ltd. (GST:NYSE), continue to increase their return assumptions for acreage adjacent to Trans Energy’s. The company’s production is set to ramp up as soon as Williams Companies Inc. completes the construction of certain infrastructure. Trans Energy’s acreage is in northeast West Virginia, on the southwest Pennsylvania border. There’s been a lot of success coming out of that area.

TER: What sort of strategy would you suggest our readers consider?

PJ: I think the micro-cap space, in general, is less correlated to the market’s vagaries. Perceived changes in foreign interest rates, for example, have a larger effect on large-cap names. Micro-cap pricing is determined more by company-specific dynamics, such as anticipated future cash flows. Plus, a lot of micro-cap names and E&Ps in general seem to be more active on hedging, and therefore should be less susceptible to changes in commodity prices. As a result, investors that exercise due diligence should be rewarded for accurate cash flow predictions. If you want to find companies where your hard work can actually pay off, then the micro-cap space is a good place to look.

Micro caps seem to be getting more active in reaching new investors, and some of the management teams have regrouped from previous lives and are starting up very successful new companies. I think Bonanza Creek Energy Inc. (BCEI:NYSE) is a great example of management hailing from one company and getting back together and starting all over again.

TER: Thanks for talking with us today and giving us some interesting input, Phil.

PJ: I appreciate the opportunity.

Philip Juskowicz, CFA is a managing director in the research department at Casimir Capital, a boutique investment bank specializing in the Natural Resource industry. Juskowicz began his career at Standard & Poor’s in 1998, where he was one of the first analysts to recommend Mitchell Energy, credited with discovering the Barnett Shale. From 2001-2005, He worked with a former geologist in equity research at both First Albany Corp. and Buckingham Research. At Buckingham, Juskowicz was promoted to a senior oilfield service analyst position, leveraging his extensive knowledge of the E&P space. From 2006-2010, he was an insider to the oil and gas industry, serving as a credit analyst at WestLB, a German investment bank. In this capacity, Juskowicz was responsible for $500M of loans to energy companies and projects. He earned a Master of Science in finance from the University of Baltimore.

Want to read more Energy Report interviews like this? Sign up for our free e-newsletter, and you’ll learn when new articles have been published. To see a list of recent interviews with industry analysts and commentators, visit our Interviews page.

DISCLOSURE:

1) Zig Lambo conducted this interview for The Energy Report and provides services to The Energy Report as an independent contractor. He or his family owns shares of the following companies mentioned in this interview: None.

2) The following companies mentioned in the interview are sponsors of Streetwise Reports: None.

3) Philip Juskowicz: I own or my family owns shares of the following companies mentioned in this interview: Bonanza Creek Energy Inc. I personally am or my family is paid by the following companies mentioned in this interview: None. My company has a financial relationship with the following companies mentioned in this interview: Empire Energy Group Ltd. I was not paid by Streetwise Reports for participating in this interview. Comments and opinions expressed are my own comments and opinions. I had the opportunity to review the interview for accuracy as of the date of the interview and am responsible for the content of the interview.

4) Interviews are edited for clarity. Streetwise Reports does not make editorial comments or change experts’ statements without their consent.

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Written by www.ew-forecast.com
EURUSD is finally trading lower, clearly in impulsive fashion from 1.3400 which is a third leg of decline, but ideally it represents an impulsive wave 3 of a larger five wave move. Notice that price also broke and closed beneath the rising trend-line of an ending diagonal which is another and very important sign of a changed trend, from bullish to bearish mode. If we are correct, then pair is now heading down to 1.3150 in the near term.
EURUSD 4h chart Elliott Wave Analysis

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By WallStreetDaily.com

Often imitated, but never duplicated, we’re serving up another round of our weekly charts.

Remember, the concept couldn’t be any more straightforward.

Since a picture can be worth 1,000 words, I try to zip my lips (well, mostly) and let some carefully selected graphics convey a few critical investing and economic insights.

This week’s gallery reveals the true reason why Steve Ballmer is bailing on Microsoft (MSFT), a dangerous psychological bias and a bullish economic phenomenon we haven’t witnessed in over five years.

Make Love, Not War

Iraq. Afghanistan. Now Syria?

With another potential armed conflict in the Middle East on the horizon, you’d think our world is becoming increasingly violent. And you’d be wrong.

Blame the perception of increased conflict on recency bias – putting too much weight into recent events. In reality, we’re not actually fighting each other as much as we used to.

Of course, as investors, we always need to be prepared for a new conflict. So what’s the best protection? A few choice investments in the oil and energy sector. (If you need help finding some, go here.)

MSFT: Still a Stupid Bet

After 13 years at the helm of Microsoft, CEO Steve Ballmer is out. He’s retiring at the end of the year. Want to know why? Take a look:

He completely missed out on the biggest technological shift in our generation – away from personal computers and toward smartphones.

It wasn’t purely bad luck, either. It was intentional.

As Ballmer famously predicted (incorrectly), “There’s no chance that the iPhone is going to get any significant market share. No chance.”

I’d certainly rank that as one of the worst predications ever made.

Of course, that wasn’t his only blunder:

• Remember the Zune? (If not, you proved my point perfectly.)

• Seen anyone with a Surface tablet lately? Yeah, me either.

• And let’s not forget the billions upon billions he squandered trying to make money on the internet via the company’s Online Services Division.

A little over a month ago, I pegged Microsoft as “a stupid bet, not a contrarian one.” Even with Ballmer’s imminent departure, I stand by that conclusion. Why? Because the damage he’s done to the company is not “just a flesh wound.”

A Rare, Global Economic Phenomenon

Here’s a budding trend that almost nobody’s talking about…

In the United States, Europe and China, flash PMI surveys – which gauge manufacturing activity – are simultaneously ticking higher.

As UBS AG’s (UBS) Andrew Cates notes, “A synchronized pick-up in global growth has been a rare phenomenon in recent years.” So rare, in fact, that it hasn’t happened since the financial crisis hit.

If this trend continues, it would be an undeniably bullish development. So keep an eye on it!

Place Your Bet on the Next $1,000 Stock

We’re having a friendly office debate concerning whether Google (GOOG) or Priceline.com (PCLN) will be the first stock to close over $1,000 per share.

Priceline has gotten the closest so far. But it’s a one-trick pony. Google, on the other hand, could unlock growth from a myriad of new initiatives to propel its shares higher.

So which company will it be? Place your bet by leaving a comment on our website. While you’re at it, don’t be afraid to share what you think about this weekly column – or any of our recent work at Wall Street Daily.

Enjoy the long weekend!

Ahead of the tape,

Louis Basenese

The post Friday Charts: Ballmer’s Biggest Blunders and the Next $1,000 Stock appeared first on Wall Street Daily.

Article By WallStreetDaily.com

Original Article: Friday Charts: Ballmer’s Biggest Blunders and the Next $1,000 Stock

By Profit Confidential

One of the hottest stock market sectors related to technology has to do with three-dimensional (3-D) printing machines. It won’t be long before every child wants a 3-D printer in the household. It is a hot stock market sector, and it is worth paying attention.

In that regard, one of the hottest initial public offerings (IPOs) this year has been The ExOne Company (XONE). This is a company we’ve looked at several times in this column, and it definitely is a speculative stock for traders.

Of course, the big problem with hot IPOs is their valuation—or rather, their extreme valuation in the face of a newly established enterprise. Most often there is no way to appropriately value an exciting, but still developing company. It’s all about the illusion becoming real. The marketplace sees the company’s opportunity and potential, and if there is a reasonable probability that it will meet its growth forecasts, Wall Street discounts the expected growth many years in advance.

This is how a small, but growing company like ExOne quickly earns a billion-dollar valuation.

Last quarter, the company missed on its sales guidance. The position retreated on the stock market, though not for long. Its recovery is emblematic of the fervor that the marketplace has for this business, which is why it is a worthy candidate for momentum traders to watch.

The company’s one-year stock chart is featured below:

Chart courtesy of www.StockCharts.com

With the company trading around a billion-dollar market capitalization, it’s very tempting for insiders and the company itself to sell more shares. ExOne fell on news of its latest stock market offering, but it recovered once again. This is a strong sign that this is a company for short-term traders.

And by traders, I’m referring to those willing to execute orders on a moment’s notice or the speculator willing to jump out of the position on any material news.

Investing in hot IPOs is a tough thing to do. It’s difficult to keep up with all the new listings and, of course, Wall Street already knows which ones are in the greatest demand. Therefore, getting an allocation is often impossible with smaller companies.

But even scanning the stock market for new 52-week highs can reveal some growing companies like ExOne. It doesn’t mean that a particular enterprise is worth what the stock market is currently paying; it’s just a trade to see if the momentum can last. (See “Startup Company with Innovative Trend Has Real Staying Power.”)

If you look up ExOne, you’ll quickly discover the other larger players in the 3-D printing business, though there aren’t that many companies in the business with an established presence.

Two larger companies have also been doing well on the stock market. Their valuations are lofty, but then again, they are doing one thing that most of the economy is not—they’re growing significantly.

Article by profitconfidential.com

By Profit Confidential

The comparative advance in the Shanghai Composite Index may be subpar and well below the moves in the S&P 500 and Dow Jones Industrial Average, but that doesn’t mean you should ignore Chinese stocks. Recall a few weeks back when I discussed the upward moves in Chinese stocks. (Read “They’re Not Popular, But These Stocks May Offer Opportunity After All.”)

While there are the non-believers who feel that China and Chinese stocks are going down the toilet and that everything with the country was fabricated by the communist government, I simply say—good luck.

Just take a look at the price charts, and you’ll notice a somewhat resurgence in Chinese stocks, especially small-cap stocks, over the past weeks, with many advancing to new 52-week highs.

Now, I’m not saying you should welcome Chinese stocks into your portfolio with open arms, but there’s clearly an increased appetite for risk and bigger potential returns, versus the current flatness in U.S. stocks.

Take a look at China-based Qihoo 360 Technology Co. Ltd. (NYSE/QIHU), a developer of Internet and mobile security solutions to the Chinese market. You can think of Qihoo as the “Norton Antivirus” of China, and with 1.3 billion people, that’s a massive market opportunity. I recommended Qihoo in one of my past publications, and it has been a massive winner, up four-fold from its 52-week low of $20.01.

Based on my technical analysis, the chart of Qihoo below is a beautiful example of a stock in an uptrend. The stock also just recorded a bullish upside trading gap.

Chart courtesy of www.StockCharts.com

What I advise is not to just bypass Chinese stocks altogether. I still feel confident the country will remain one of the top growth markets in the world, especially as income levels rise and consumption increases to levels seen in the Western countries. This would help to drive China’s gross domestic product (GDP) and reduce the country’s current reliance on import demand from its trading partners.

A good example of the increased visibility of China as a bastion for consumer spending is the luxury stocks area. The rising wealth in China has driven major demand for high-end goods. This has helped to drive demand and revenues for the luxury stocks, such as Michael Kors Holdings Limited (NYSE/KORS), Coach, Inc. (NYSE/COH), and Tiffany & Co. (NYSE/TIF).

Tiffany reported strength in its second quarter, which the company attributed to its sales in China. Sales in China and the Asia Pacific surged 20% year-over-year, versus a surprising 11% for Europe, and a mere two percent in the United States. (Source: “Tiffany Reports Its Second Quarter Results,” BusinessWire, August 27, 2013.)

So while there will likely continue to be fraud by some Chinese companies, the situation is getting better due to the U.S. Security and Exchange Commission’s demands—and this means you shouldn’t ignore Chinese stocks.

Article by profitconfidential.com

By Profit Confidential

As we march towards another debt ceiling limit…

The U.S. Treasury Secretary, Jacob J. Lew, wrote a letter to Congress this week stating the U.S. government will hit the debt ceiling by October. He wrote, “…Congress should act as soon as possible to protect America’s good credit by extending normal borrowing authority well before any risk of default becomes imminent.” (Source: U.S. Department of the Treasury, August 26, 2013.)

Lew added, “Protecting the full faith and credit of the United States is the responsibility of Congress because only Congress can extend the nation’s borrowing authority. Failure to meet that responsibility would cause irreparable harm to the American economy.” (Source: Ibid.)

Will Congress raise the debt ceiling again? It certainly will!

Since 1960, Congress has raised the debt ceiling 78 times—49 times under Republican presidents and 29 times under Democratic presidents. (Source: U.S. Department of the Treasury web site, last accessed August 27, 2013.)

The debt ceiling, which is set by Congress, puts a restriction on how much the national debt can be increased.

On August 23, 2012, the U.S. national debt stood at $15.97 trillion. Fast-forward one year to August 23, 2013, and our national debt hit $16.73 trillion. (Source: Treasury Direct web site, last accessed August 27, 2013.) This is an increase in the national debt of 4.75% in just one year. Of course, in all 78 times Congress raised the debt ceiling, the new debt ceiling limit was later hit and needed to be raised again.

Our government continues to post an annual budget deficit. For the four fiscal years from 2009 to 2012, the federal government posted a deficit of more than $1.0 trillion annually. This year, it may be less—but not by much.

The letter to Congress by the U.S. Treasury Secretary is a simple request to increase the credit limit on America’s credit card—just as a family that spends more than it earns might do.

One might think this cannot go on forever—the debt ceiling being raised and the government subsequently hitting that new limit. But when we look at the fact that our debt-to-gross domestic product (GDP) ratio is only 105% and Japan’s debt-to-GDP is 205%, our national debt would have to double to $32.0 trillion for us to match Japan’s debt-to-GDP. But, of course, at that level of debt, instead of the U.S. dollar being the reserve currency of the world, it would likely become the “laughing stock” currency of the world.

Michael’s Personal Notes:

So far, 487 companies in the S&P 500 have reported their second-quarter earnings. Turns out 72% of them were able to beat mean estimates. The blended corporate earnings growth rate for S&P 500 companies in the second quarter was 2.1%. (Source: “Earnings Insight,” FactSet, August 23, 2013.)

On the surface, the corporate earnings growth rate of these companies certainly looks good. But the devil resides in the details!

While a significant number of the S&P 500 companies were able to beat the already-lowered earnings estimates in the second quarter, only 53% of these companies reported revenues above mean estimates. Not impressive.

The financial sector of the S&P 500 reported earnings growth of 28.1% in the second quarter—this was, hands down, the biggest contributor to “robust” growth in corporate earnings we saw in the second quarter.

The other nine sectors of the index didn’t do as well. Sectors like the consumer discretionary, utilities, consumer staples, health care, and industrial sectors showed corporate earnings growth of less than five percent. The telecom services, information technology, energy, and material sectors had negative earnings growth.

In other words: take the financial sector out from the S&P 500 and corporate earnings for the second quarter border negative growth.

Going forward, it’s a rough road. For the third quarter, 103 S&P 500 companies have provided an earnings outlook. Of these companies, 85 of them have issued a negative outlook, while only 18 have provided positive guidance. The number of S&P 500 companies that are pessimistic about their corporate earnings in the current quarter makes up more than 82% of those that have issued their earnings guidance!

All of this shouldn’t come as a surprise to readers of Profit Confidential; in these pages, I have been talking about slowing corporate earnings and revenues since the beginning of this year. For the second quarter, companies in the S&P 500 only beat already-lowered expectations!

Now that we are hearing that the Federal Reserve may pull back on all that paper money printing it’s been busy with, the stock market is going down. The chart below clearly shows the index is falling apart. Don’t expect corporate earnings to save it!

                        Chart courtesy of www.StockCharts.com

 What He Said:

“The Dow Jones Industrial Average, the S&P 500 and the other major stock market indices finished yesterday with the best two-day showing since 2002. I’m looking at the market rally of the past two days as a classic stock market bear trap. As the economy gets closer to contraction, 2008 will likely be a most challenging economic year for America.” Michael Lombardi in Profit Confidential, November 29, 2007. The Dow Jones Industrial Average peaked at 14,279 in October 2007. A “suckers” rally developed in November 2007, which Michael quickly classified as a bear trap for his readers. By mid-November 2008, the Dow Jones Industrial Average was at 8,726.

Article by profitconfidential.com

By Profit Confidential

So far, 487 companies in the S&P 500 have reported their second-quarter earnings. Turns out 72% of them were able to beat mean estimates. The blended corporate earnings growth rate for S&P 500 companies in the second quarter was 2.1%. (Source: “Earnings Insight,” FactSet, August 23, 2013.)

On the surface, the corporate earnings growth rate of these companies certainly looks good. But the devil resides in the details!

While a significant number of the S&P 500 companies were able to beat the already-lowered earnings estimates in the second quarter, only 53% of these companies reported revenues above mean estimates. Not impressive.

The financial sector of the S&P 500 reported earnings growth of 28.1% in the second quarter—this was, hands down, the biggest contributor to “robust” growth in corporate earnings we saw in the second quarter.

The other nine sectors of the index didn’t do as well. Sectors like the consumer discretionary, utilities, consumer staples, health care, and industrial sectors showed corporate earnings growth of less than five percent. The telecom services, information technology, energy, and material sectors had negative earnings growth.

In other words: take the financial sector out from the S&P 500 and corporate earnings for the second quarter border negative growth.

Going forward, it’s a rough road. For the third quarter, 103 S&P 500 companies have provided an earnings outlook. Of these companies, 85 of them have issued a negative outlook, while only 18 have provided positive guidance. The number of S&P 500 companies that are pessimistic about their corporate earnings in the current quarter makes up more than 82% of those that have issued their earnings guidance!

All of this shouldn’t come as a surprise to readers of Profit Confidential; in these pages, I have been talking about slowing corporate earnings and revenues since the beginning of this year. For the second quarter, companies in the S&P 500 only beat already-lowered expectations!

Now that we are hearing that the Federal Reserve may pull back on all that paper money printing it’s been busy with, the stock market is going down. The chart below clearly shows the index is falling apart. Don’t expect corporate earnings to save it!

Chart courtesy of www.StockCharts.com

 What He Said:

“The Dow Jones Industrial Average, the S&P 500 and the other major stock market indices finished yesterday with the best two-day showing since 2002. I’m looking at the market rally of the past two days as a classic stock market bear trap. As the economy gets closer to contraction, 2008 will likely be a most challenging economic year for America.” Michael Lombardi in Profit Confidential, November 29, 2007. The Dow Jones Industrial Average peaked at 14,279 in October 2007. A “suckers” rally developed in November 2007, which Michael quickly classified as

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GBPUSD stays within a upward price channel on 4-hour chart, and remains in uptrend from 1.4813 (Jul 9 low). As long as the channel support holds, the uptrend could be expected to resume, and one more rise towards 1.6000 is still possible. Resistance is at 1.5560, a break above this level will indicate that the fall from 1.5717 has completed, then further rise to test 1.5717 resistance could be seen. On the downside, a clear break below the channel support will suggest that the uptrend from 1.4813 had completed at 1.5717 already, then the following downward movement could bring price to 1.5000 zone.

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