So far nothing good came out 2nd quarter earnings, to justify the +46% rally. I talked about how did banks cook up their balance sheets and sugar-coat their earnings before, there is no point to repeat myself, for those who recently joined my blog you can click on this link to read the article.
77% of companies listed in S&P500 beat the estimate that is very impressive. 14% missed and 9% where in line, you might say this is fantastic, but here is the catch their year to year earning dropped in average of 31% and actual earning growth dropped 23.1% .
I bet you are scratching your head. Off course the talking-heads in CNBC and Bloomberg would not show you other side the coin, their job is to sell you stocks.
Can you guess how 77% of companies could beat the analysts estimate?
They came with this numbers just by cost cutting; they closed factories and fired employees to save money.
There is nothing wrong with cost cutting, but cost-cutting can only go so far. Here is the question, how many employees can they fire 3rd and 4th quarters? Which factories are they going to close next quarter to save money? Be smart read between the lines, DO NOT LISTEN TO TALKING HEADS IN CNBC. Think about it, they didn't see this crisis coming... how could see the way out!!!!
They say unemployment is a lagging indicator, but when it reaches +12% it becomes leading indicator. The government unemployment data is not accurate, they do not include people who gave up and no longer looking for job, plus the mix the raw data with seasonally adjusted data with dilute the unemployment rate. The real unemployment is above 14%.
As I said before, it's better be safe than sorry. This is not a bull market rally.
The majority of companies who announce earnings made less money compare with the 2nd Q 2008 therefore bulls argument to justify this rally is a big joke.
Technical look perfect to for bulls, and there is a strong argument for continuation of rally, but all indicators show overbought,and there is a chance for fomation of "Broadening Top Pattern" in S&P500 plus fundamentals are not getting better, therefore I went short the market on friday, if I see I'm right. I will add to my positions in coming days. If you want to speculate and buying stocks that's your decision, I don't gamble with my money.