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.
ECB Draghi comments.
First Decline in Earnings since Third Quarter 2009
It's ugly out there and it could get worse.
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.
The Next Few Days Are Critical for a Potential Trend Reversal
Did a “bearish divergence” yesterday signal a top for the equity markets?
Was Friday’s Price Action in Gold Signaling a Top in the S&P 500?
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.