As earnings season begins tomorrow with Alcoa, I see no reason to
fear the reaper just yet. Although I am keeping an eye out for him.
Given the chaos in the Forex markets with the dollar being strong, earnings estimates reduced and the geopolitical chaos out there, the S&P 500 shouldn't be at less than 2% from it's all time high. What this indicates is that the Flow of Global Capital is still keeping the market afloat. I'm not saying that it's overvalued at this point. As I write this, the S&P 500 is at 2085.77. And according to Howard Silverblatt, the Senior Analyst at Standard and Poors, Operating Earnings for the index in 2014 were $113.02, and are projected for 2015 to be $118.37. This puts trailing operating PE at 18.45 and forward PE at 17.62. I would worry when this get to somewhere in the low 20s implying an Earnings Yield less than 5%.
Earnings Estimates for 1Q15 have come down 10% since december. This sounds to me as the usual Kabuki of lowering estimates to set up the usual 65%-ish of stocks beating their estimates every quarter.
The Market Breadth charts I watch also look healthy for a supported Bull Market.
The SPY weekly chart also shows a quite healthy trend. Like I mentioned back in
February a new base would be healthy. I thought at the time it should be around 206 on the SPY. We are off that level.
Remember: Don't Fear The Reaper .. . yet.
