Archive for May, 2013

The S&P 500 is Now 1000 Points Up from March ’09 Lows

May 21, 2013 Leave a comment

Or: “…These Go to Eleven“.

S&P 500, Weekly chart,

S&P 500, Weekly chart,

We are currently sitting at $1666.29, which is about 1000 points above the March 2009 low of $666.79.  Contrary to my previous forecast, we blew through the $1600 level on a positive jobs report and rose rapidly to our current level.  All is well and $1700 is the next target, right?  Right?

As of May 19th, 90% of publicly traded companies have reported 2013 Q1 earnings.  Of those companies, the FactSet earnings insight report details that 70% have reported earnings above the mean estimate and 47% have reported revenue above the mean estimate, while the blended earnings growth rate was 3.2%.  I highly recommend taking a moment to read that FactSet report.  I’ll link to it again because there’s some great data in there.

Let’s take a moment to look more closely at these numbers.

Google, Comcast, Wal-Mart, and a number of other large-cap companies, reported profits that beat expectations, while their revenues missed.  What is one way a company can miss on revenue, but still beat on the bottom line?  That’s right, they can cut their expenses.  What is a company’s biggest expense?  Payroll.

Furthermore, I am not convinced that the jobs data is detailing a true picture of the job market.  One of the criteria accounted for in the unemployment rate is whether or not one is actively seeking work.  A falling unemployment rate could indicate that, as a group, fewer people are actively looking for work and therefore it would seem on the surface that there is a smaller pool of applicants causing the rate to fall artificially.

The up-shot of this is that Wall Street and Main Street have essentially been de-coupled.  I don’t think it can be accurate to say that since we’re hitting all time highs in the major stock indices, that our economy is all well and good and everything is peachy.

Companies have been getting more efficient and the markets are certainly rewarding that efficiency as we hit all time high after all time high. The question is at what cost to the broader economy. If this is the new normal efficiency level, it might be difficult to say we will return to pre-2008 employment levels.

I know I’m getting macro here, but I think it’s important to understand the economic climate prior to investing (or trading) any one company’s stock.  It can be difficult to swim against the prevailing long-term trends, so I try to react, or anticipate, accordingly.

So where do we head from here?  All the technicals would indicate that we’re overbought.  A Fibonacci retracement from March ’09 low of $666 to $1666 would indicate that a 23.6% retracement brings us to $1450.  I like that level as a potential medium-term pullback target, from which we can bounce up and continue our long-term bull run.  I would describe myself as cautiously optimistic, but I can’t see this run lasting for much longer without some sort of consolidation.

It should be noted that I have no positions in any stocks mentioned (or unmentioned, aside from an employer-sponsored retirement plan), nor will I be initiating any positions in any stocks mentioned (or unmentioned) in the next 6 months.  The information contained in this blog should be used for educational purposes only and should not be considered financial advice.  I am not an investment professional, nor do I possess any credentials implying myself as such.  The main purpose of the blog is to educate its readership, myself included, about concepts and ideas that were previously unknown to me.


Categories: Stock Market Analysis
Guy Kawasaki

What Shape Are You?

Seeing Both Sides

What Shape Are You?


Some thoughts from a scientist who moved to the business side of biotech

Society & Social Media

Adam Gismondi, Ph.D. // Tufts University

In the Pipeline

What Shape Are You?


What Shape Are You?

This Week In Startups

What Shape Are You?


Recovering scientist turned early stage VC | A biotech optimist fighting gravity

%d bloggers like this: