Is This The Beginning Of A Larger Equity Market Correction?

Posted by David Templeton on Sunday, April 19, 2015
Awaiting the 10% equity market correction seems to be on the minds of a number of strategists as soon as the market begins a turn lower. The last correction of greater than 10% occurred in 2011 when the S&P 500 Index declined nearly 20% between July and October 2011.Since March 23rd through Friday's close, the S&P 500 Index has declined 43 points to 2,072 or a decline of just 2%. In the first week of March, the S&P fell 3.5% before rebounding. An important support level has been the 50 day movin...
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Economic Surprise Indices: Bad News Might Actually Be Good News

Posted by David Templeton on Sunday, April 19, 2015
One criteria investors and strategists evaluate on a regular basis is whether or not economic data that is reported on a near daily basis is exceeding or missing expectations. A commonly reviewed index is the Citigroup Economic Surprise Indices (CESI). According to Bloomberg,"The Citigroup Economic Surprise Indices are objective and quantitative measures of economic news. They are defined as weighted historical standard deviations of data surprises (actual releases vs Bloomberg survey median). A...
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Expecting A Weak Q1 2015 Earnings Season, But Looking At Forward Guidance

Posted by David Templeton on Sunday, April 12, 2015
With first quarter 2015 earnings season beginning to hit full stride in the coming two weeks, earnings growth expectations for Q1 2015 are now negative at -4.6%. The last negative quarterly growth result was Q3 2012 as can be seen in the below table from Factset.From The Blog of HORAN Capital AdvisorsSource: FactsetOut of the small percentage of S&P 500 companies that have reported to date, 70% have cited the strong Dollar as the cause of their negative Q1 2015 report. As noted at the beginning ...
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Emerging Markets Not Out Of The Woods Yet

Posted by David Templeton on Friday, April 10, 2015
As investors seem to be expecting an increase in interest rates by the Fed to be pushed out later this year, the emerging market trade has seen a positive impact relative to its U.S. developed counterpart. As the below chart shows, on a year to date basis the iShares MSCI Emerging Markets ETF (EEM) has moved up 9% versus the S&P 500 Index return of 2%.From The Blog of HORAN Capital AdvisorsThis risk on appetite has carried over into small cap stocks as well. Year to date the Russell 2000 Index i...
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A Good Quarter To Be a Non-Dividend Paying Stock

Posted by David Templeton on Thursday, April 09, 2015
Through the first quarter of 2015, performance would suggust it was a good time to be a non dividend payer stock. As the below table shows, the average return of the non-payers generated a return of 6.49% versus the payers average return of 1.16%. I would note, however, the average return in the quarter for both the payers and non-payers exceeded the cap weighted return of the overall S&P 500 Index.From The Blog of HORAN Capital Advisors
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Strong Buyback Activity Reducing Share Count

Posted by David Templeton on Thursday, March 26, 2015
S&P Dow Jones Indices is reporting that stock buybacks fell sequentially in the fourth quarter last year to $132.6 billion from the third quarter level of  $145.2 billion. However, on a year over year basis, buybacks increased by 2.5%. this still strong buyback activity has served as a tailwind for earnings growth as the report notes 20% of the S&P 500 companies have reduced their share count. Howard Silverblatt, Senior Index Analyst at S&P Dow Jones Indices notes, "...While fourth quarter expen...
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Bullish Sentiment Declines To Level Last Seen In Early 2013

Posted by David Templeton on Thursday, March 19, 2015
This morning the American Association of Individual Investors reported individual investor bullish sentiment declined to 27.2% versus last week's reading of 31.6%. This is the lowest level for bullish investor sentiment since April 4, 2013. Additionally, today's report places the sentiment reading at one standard deviation below the average sentiment level. The decline in sentiment over the past week is proving its status as a contrarian indicator as the S&P 500 Index is higher by 2.9%.From The ...
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Bearish Equity Sentiment Showing Up In The Equity Put/Call Ratio

Posted by David Templeton on Saturday, March 14, 2015
As we noted Thursday, the American Association of Individual Investors reported a further decline in its bullish sentiment reading. The reported level of 31.6% is near a level indicative of overly bearish investor sentiment. Further confirmation of this bearish sentiment is seen in Friday's equity put/call ratio which is reported at .80. As with the AAII bullish sentiment reading,  the equity put/call ratio is most predictive at extreme levels or above 1.0. Nonetheless, overly bearish investor s...
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Investors Less Bullish As Market Nears Oversold Level

Posted by David Templeton on Thursday, March 12, 2015
The American Association of Individual Investors reported an 8.2 percentage point decline in bullish investor sentiment to 31.6% this morning. This is the lowest bullishness level since bullish sentiment was reported at 30.89% in early August of 2014.From The Blog of HORAN Capital AdvisorsSource: AAIIThis decline in bullish sentiment has occurred at a time when the S&P 500 Index appears to be nearing an oversold level. As the below chart shows, the technical stochastic indicator has fallen to an...
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Additional P/E Multiple Expansion Possible Until The First Fed Rate Hike

Posted by David Templeton on Sunday, March 08, 2015
A common occurrence in equity bull market cycles is the fact that a company's valuation, or P/E multiple, expands. This so called multiple expansion is one factor that contributes to overall equity returns during bull market phases. The downside to multiple expansion is it does not occur ad infinitum. As the below chart shows, the P/E multiple for the S&P 500 Index has expanded by 64% by increasing to 17.3x earnings versus 10.6x earnings at the start of the current bull market.From The Blog of H...
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