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Corporate Revenues Miss, a False Breakout in the S&P 500, and Europe's Canary in the Coalmine is Out Cold

Phoenix Capital Research's picture




 

 

The markets moved higher yesterday because frankly Tuesday is the day for upside moves: thus far in 2013, we’ve had 13 straight Tuesday gains. This, combined with the very short-term oversold basis of several markets, mainly Gold and commodities, gave the “risk on” trade a bump.

 

From a technical perspective, the S&P 500 is in danger of breaking several critical trendlines:

 

 

The rising wedge pattern is a consolidation pattern that can break either up or down. One of the trickiest issues is a “false breakout,” which occurs when the initial move out the pattern proves to be short-lived. False breakouts are usually followed by violent moves in the opposite direction as traders realize the initial move was false.

 

In today’s market, that direction would be down.

 

We get additional signs of trouble from Spain. It was Spain that nearly took down Europe last year. In this sense, the Spanish stock market, the Ibex, has become the proverbial “canary in the coalmine” for Europe. If the Ibex is rallying, investors believe Europe is alright. If the Ibex breaks down, then the European Crisis is back.

 

The Ibex has stalled and is in danger of breaking critical support:

 

 

Final indications of trouble come from earnings. We’ve had a slew of corporations beating earnings guidance (which isn’t too difficult given how easy it is to manipulate profits) but missing revenues.

 

Coke, Goldman Sachs, Yahoo! all did this yesterday. They join Blackberry, US Bancorp, St Jude Medical and others.

 

Revenues are much harder to fudge than profits. They are more closely tied to the economy. So if revenues are missing estimates, it can be a warning that the economy is slowing.

 

Investors take note, the markets are sending multiple signals that things are not going well in the world.

 

And stocks are always the last asset class to realize this.

 

If you’re not preparing for a potential bout of deflation in the markets, we can help you to do so. We offer a FREE Special Report outlining actions you can take to protect your wealth and loves ones from market risk. It’s called Protect Your Portfolio and you can download a FREE copy here:

 

http://gainspainscapital.com/protect-your-portfolio/

 

Best Regards,

Graham Summers

 

 

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Wed, 04/17/2013 - 12:51 | 3461574 Widowmaker
Widowmaker's picture

Synthetic markets will fix everything.

No ponzi left behind on behalf of Fascism, sponsored by the Incorporated Imperialist Bank of Lost Confidence.

Money is dead.

Wed, 04/17/2013 - 12:38 | 3461474 WTF_247
WTF_247's picture

The game is to keep cheerleading the market higher as the big players shift from long to short.  Then turn the tide with downgrades of GDP and outlook.

You saw BofA and GS today all a sudden change their mind on the "great recovery" of 2013 in the second half.  3 days ago they were telling clients to go all in.  In just 3 days the tide has turned to the point its now all out.  Nothing has changed except the big players have fliped from long to short and now push it lower.

 

From a technical outlook the SP500 is very poor for the longs.  We had big down followed by big up followed by big down right near all time high.  To me that signals a major top.  It is still fully possible these clowns rescue the market enough today to make it look decent (back above 1555 area).  To me it seems the shift is now short the rally rather than buy the dip.  

Wed, 04/17/2013 - 10:56 | 3460794 Everybodys All ...
Everybodys All American's picture

I thought the ultimate canary was a spokesman at Blackrock who said point blank that they felt further QE by the Fed was unwarrented. Blackrock said this about ten days ago and the market has been wondering since. In my estimation Blackrock signaled it was time to sell US equities with both hands.

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