Considering the disquieting news over the weekend, U.S. stocks appear to be taking it in stride, at least so far. Index futures have recouped about a third of their opening bar losses in the first hour after the E-Mini Dow opened 150 points lower. On the fear/greed scale, this is roughly in the middle. DaBoyz are not so cocky that they’ve engineered an avalanche in order to steal stocks dumped by widows and pensioners. But neither are they so fearful that they’re trying to maneuver stocks back to unchanged in order to distribute them aggressively, assuming this is even possible. Creating artificial buoyancy will be especially difficult Sunday night, since there is enough real fear out there — even if there is none on Wall Street — to restrain any rally.
Stocks Open Weak, but No Sign Yet of Panic
- November 16, 2015, 5:52 am
Panic may not be here quite yet (at least in the short term) but it is surely on the horizon as the following damning chart attests (see link below).
This 40 chart, recently produced by Thompson Reuters and Barclays Research, is about as unequivocal as they come where the future of profit margins and thus stock market performance is concerned.
Granted, profit margin charts are not exactly the same thing as reading stock indices and divining the future using this chart will never be easy where timing is concerned however any good technical analyst will instantly draw the correct conclusions.
What we have here is a classic megaphone pattern that is 20 years in the making. And it has now clearly rolled over telling us that corporate profitability will be in sharp decline for the next several years.
Stock markets however can keep rising even as profits decline however we cannot help but notice the relatively obvious correlation of past recessions, major market corrections and profits on the wane. And this chart is alarming because it suggests profit growth could fall to zero on this leg down!
So this is a warning and it may be telling us in simple terms that we have already entered recession. Take a look at it yourselves and see what conclusions it leads you too.
S&P500 Net Profit Margins — 40 year chart courtesy of Thompson Reuters and Barclays Research. This was linked from Stockman’s Corner
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