Weakening Wednesday – Market Internals Flash CAUTION!

Actual earnings are missing by 1.6%.

December 30th expectations of $30.60 for S&P Q4 earnings are missing the mark by a wider and wider margin as each company makes it's report.  With 55% of the S&P 500 reporting through last Friday, sales are missing by 0.1% overall and earnings, even with financial engineering (non-GAAP reporting, buybacks, "one-time" exceptions) are only 4.6% above last year, when the S&P was at 1,850 (24% lower) on Q1 earnings. 

WAKE UP PEOPLE!!!  I know you are in some sort of complacent stupor because the Volatility Index (VIX) is at 11.49 (makes a good long here) but come on – can you really be so stunned by the political madness that you forgot how to value a company?  500 companies, for that matter…

Do you see where the PRICE of the S&P crossed way over earnings back in mid-2013?  That is when people began to lose their minds but we had a couple of corrections and sanity was almost restored until early last year, when the market went crazy and now, 24% later, hasn't looked back yet.  That's a 5 standard deviation move off the value line (actual earnings) for the S&P – investors are overpaying for stocks in the 15-20% range.  

Even worse, the growth in earnings is pretty much entirely tied to just two sectors: Financials and Utilities.  Telcom services are down 28%, Energy is down 5.4% and Industrials (like the Dow Jones Industrial Average) are down 8.2% with the Dow at its 20,000 all-time high. This does not make sense - Chewbacca!  

And don't even get me started on guidance!  

Energy companies have given no guidance because they have no f'ing idea what is going to happen.  Just yesterday we got an API Report showing the 2nd biggest build of oil (14.2Mb) in US history – what cutbacks?  If EIA confirms this number, we will have had 50 MILLION barrels of oil (10%) build up in our commercial inventories in the past 4 weeks – that's crazy!  

The energy sector has been…
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