Five Reasons For Caution In US Equities

Tyler Durden's picture

While there may be a plethora of geopolitical reasons to be 'cautious' of getting over your skis in US equities, there are a number of more quantifiable reasons for not buying-the-f##king-dip here. Between the sustainability of US earnings and the sell-in-May mantra, we highlight five foods-for-thought before you push all-in this morning. Of course the only bullish reason left is Central-Bank-driven and remains the elephant in the room but as we get closer and closer to the election, the Fed will be increasingly snookered and require a market plunge of more than 1.5% to step in and save the civilized world with S&P 500 1285 as a target for Fed action based on last Summer's excitement.

The S&P 500 sold off quite handsomely the last two Summers - notably in the lead-up to post-Fed action...

 

While macro data continues to deteriorate rapidly...

And while Q1 earnings surprised from notably marked down expectations - the sad truth is that this supposed strength is absolutely ignored by the analyst community when it comes to forward guidance which has not changed at all...

and if you are told that stocks are cheap - they are not - with non-cyclicals at a post-crash peak in forward P/Es and Cyclicals in the middle of their range, it is clear that stocks are far from relatively attractive...

and finally, relative multiples have contracted for economically sensitive stocks throughout the recovery - despite supposedly superior company results - suggesting a general lack of belief in the sustainability of any economic growth story...

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DavidC's picture

Trading volumes are incredibly low today so far.

DavidC

Jack Napier's picture

Joe Granville said a couple months back that low volume precedes a drop. As if anybody needed a red flag for that. Hopium addiction is entering the QE withdrawl phase.

DavidC's picture

Just checked the volume levels and they're lower than 23rd December/27th December (NASDAQ just slightly higher than the 27th).

I'm watching minute charts today as it's a Bank Holiday in the UK and I have the time to. It's purely bot action. And the Exchanges wonder why volumes are completely drying up. It's their own doing.

DavidC

The trend is your friend's picture

Doesn't look like anyone is nervous today.  All indexes might end up in the green by 4

rocker's picture

Does anybody know where to get volumes during the day that are accurate?  With or without delay?  Thx

Xkwisetly Paneful's picture

In an upset of record proportions, that station's playing the same song, time after time after time.

Don't have any other music?

Keep fighting the fed we'll see how that works out in the end.\

BTW scoreboard update-

US Equities=still virtual zero participation from the retail investor.

Metals=retail investor over invested.

Keep that playing that song.

 

Body of Lies's picture

If 70-80% of volume is HFT then the 'real' volume is absolutely dismal.

rosiescenario's picture

Man, Haven't heard that name in eons.....I recall when he could move markets dramatically with his predictions....

DeltaCharlie's picture

Must have been those people listening to Buffett the Messiah on CNBS TV today and the Jerkshire cum-fest over the weekend. 

Levadiakos's picture

Really too much sugar for my taste

HarryM's picture

Feds will requre a drop of 1.5% ?  

Praetorian Guard's picture

Can anyone explain why the S&P is shooting up??? Weird?

JR's picture

Speaking of central control, I heard this morning that the traffic volume in the stock market is now half of what it was in 2008.

Boilermaker's picture

The lower it goes the better for the central banks. 

DavidC's picture

Easier to move prices in a desired direction (up) on low volumes.

DavidC

vmromk's picture

Bernanke says Buy, I say FUCK Bernanke.

FXPortent's picture

Wait, no one said it yet?!

 

Gold, bitchez!

buzzsaw99's picture

Face Book

Fukked Buyer

 

enough sed

Boilermaker's picture

LMFAO...take a step back and realize how fucking pathetic it is to even have to write an article like this.

My god, how low can this go?

ArkansasAngie's picture

It will take a big drop to "force" the Fed to print money running up to the election. 

Will it work again or is half-life getting halfed progressively?

Boilermaker's picture

Why?  They don't need congressional approval to do whatever they want to do.  They'll do whatever their banker overlords instruct them to do.

G_T_A_44's picture

The 'Elephant' in the room is and remains:

 

$707 Trillion OTC Notional

 

tic tic tic tic

Boilermaker's picture

Right, because those have a chance in hell of paying off.

It depends what a 'credit event' is as judged by those that don't want to pay. You can figure it out from there.

Mugatu's picture

Understand this about this market - Every meat puppet on CNBC yaps about the market being undervalued, but it is actually just the opposite.  Equities are grossly over-valued because most investors are content being long in this shitty economy because they feel Uncle Bernanke will bail them out if things get too bad.  

Call this over-valuation the "Bernanke Premium".  But as any trader will tell you, eventually all premiums disappear.  Sometimes it happens very fast, and sometimes it takes a months.  The Bernanke Premium is probably about 10% of the price of the S&P.  Just imagine what would happen if people felt that there would be no market manipulation by the Fed to save thier IRA's?  Its a big bonus in investor's minds.

Sooner or later, equities must work off this 10% premium.  This is why equities must be avoided.  You may gain this year, but eventually this premium must be worked off. 

buzzsaw99's picture

it is a lot higher than 10% imo. 75% is my guess.

buzzsaw99's picture

How about some nice AIG stock? Turbo Timmy is selling to some lucky buyer. lulz lulz lulz

sbenard's picture

In this bizarro world, bad news is being seen as good news (certain to bring more QE), and good news is being seen as good news. Isn't that what bubbles are made of?

mickeyman's picture

When Tyler capitalized "Summers" I thought he meant Larry.

Boilermaker's picture

DOW ready to go green also.

Time to blast this mother fucker higher for no reason other than you can.  Same reason my dog licks his ass, I guess.

I wouldn't be surprised, at all, to see DOW +100 by the close as 'confidence sign' and a 'shrug off' of the election issues.

optimator's picture

They won't take it green, it would show the sheeple how phoney it all is.

francis_sawyer's picture

Five reasons for caution in equities:

#1 They're redeemable in FRN's (or other fiat currencies)

#2 They're redeemable in FRN's (or other fiat currencies)

#3 They're redeemable in FRN's (or other fiat currencies)

#4 They're redeemable in FRN's (or other fiat currencies)

#5 You could be buying PM's instead

Body of Lies's picture

ES up 5 points .... certainly this must be a play on fundamentals

orangegeek's picture

SP500 weekly broke support last week that was in place for 7 months.

 

http://bullandbearmash.com/index/sp-500/weekly/

 

This is a signifcant sign of weakness.

sawman's picture

Why 'Long Term, a Greek Exit Would Be Bullish for Everyone'

Current headlines on CNBC. You couldn't make this shit up. Propaganda is one thing but "please"! Now the elections are not going their way they try to print a positive slant on a Greek exit from the Euro

Only a few months back a Greek exit was going to spell the end of the f***ing world as we know it.

I do however agree that a Euro exit would be good for the Greeks. The only thing is they should have done it several hundred billion Euro's ago.

Boilermaker's picture

Presto, DOW green also.

See, wasn't that easy?  Now, everyone can justify a ramrodding tomorrow as 'continuation' and 'confidence showing' about the state of affairs.

Golly, I never saw it coming today...never.  Take what was an epic dump and slam the fuck out of the market with e-cash to rip the face off the shorts.  Who'd a thunk it?

falak pema's picture

reposted : 

 


 don't know if you have read the FOrtune 500 report on 2011 corporate results, but the top corporatons of USA have NEVER made so much money. Talk about decoupling; if USA and  EUrozone are Not decoupled, the 1% and the general economy are. Ominous trends for First world livers, as the top 500 make their money elsewhere, pay minimal taxes and don't employ many first world workers...just look at Apple. New world Oligarchy order is here to stay. 

Exxon Mobil - Fortune 500 - XOM

food for thought on this thread...

oddjob's picture

Money only determines your price, similar to a whore, New World Oligarchy is only here to stay as long as it is welcomed. Remove the shills and enablers first.

Stuck on Zero's picture

Was the gist of this to sell in May and go away?

CryingBear's picture

SHORT SQUEEZE COMING VERY SOON. BET ON AAPL AT 10:30 AM EST UNTIL ES 1400, THIS IS WHEN BOTS COME IN TO BUY.