The market is still holding onto gains sourced from ECB President Mario Draghi comments. But how long can the SP500 divergence from the real economy last.
Dismal U.S. corporate outlooks and worries about slower worldwide growth have pushed third-quarter earnings estimates into negative territory, which, if it came to pass, would be the first drop in three years.
Third-quarter earnings of Standard & Poor's 500 (^GSPC) companies are now expected to fall 0.1 percent from a year ago, a sharp revision from the July 1 forecast of 3.1 percent growth, Thomson Reuters data showed on Thursday.
Equity markets have been on a tear thus far in 2012, with the S&P 500 soaring 7 percent and the tech-heavy Nasdaq up 12 percent. That’s the best start to a new year since 2000. In fact, the Nasdaq has rallied to an 11-year high.
Friday morning traders and market participants awaited the key January employment report from the U.S. Bureau of Labor Statistics. The reaction to the supposedly wonderful report was a surge in the S&P 500 E-Mini futures contracts as well as several other key equity index futures.
Despite continued gloomy economic news and recession calls by the Economic Cycle Research Institute (ECRI) and Hoisington Investment Management, the stock market doesn’t seem to be listening. Last week the S&P 500 rose 7.4 percent – the largest weekly gain since March 2009 – on news of global central bank coordination, China’s reserve requirement cut, the lowest U.S.
Gold is hanging around an important support level at $1715. If we can bounce off of support here and begin to trend higher it would a signal that gold is uncoupling from the problems in the broader market. The likely scenario is that we head lower with the market retesting the trendline at which point we will be oversold (according to the RSI) and a rally starts.
The Federal Reserve is holding a two-day meeting Tuesday and Wednesday of this week. Market participants are expecting the Federal Reserve to prop up financial markets yet again with some grand new plan. The fact is the Federal Reserve is running out of bullets.
