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Has anyone been swimming naked?

By Colin Twiggs
April 12, 2016 5:00 p.m. AEST (3:00 a.m. EDT)

Advice herein is provided for the general information of readers and does not have regard to any particular person's investment objectives, financial situation or needs. Accordingly, no reader should act on the basis of any information contained herein without first having consulted a suitably qualified financial advisor.

The S&P 500 has run into resistance at 2100 as the quarterly earnings season kicks off. 21-Day Twiggs Money Flow is falling, indicating (medium-term) selling pressure. Reversal below 2000 would warn of another test of primary support at 1820 to 1870.

S&P 500 Index

Quarterly earnings per share (as reported) have declined since Q3 2014.

S&P 500 Quarterly EPS

When we break this down by sector, it is clear that Energy is responsible for the sharp fall. So why the pessimism about this quarters earnings releases?

S&P 500 Sectors - Quarterly EPS

There are concerns that the contagion is spreading to other sectors. I covered falling profit margins (in the nonfinancial sector) and shrinking net interest margins of major banks last week. There were already signs that earnings were dipping — in Materials, Utilities, Financials and (surprisingly) Health Care — in late 2015.

Thursday, with a number of Financial heavyweights scheduled to release earnings, should give an inkling of how bad the most recent quarter has been.

S&P 500 Scheduled Releases

.... and if anyone has been swimming naked.


Know that prudent, cautious, self-control
Is wisdom's root.

~ Robert Burns (1759-1796)


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