Profit Confidential Warns that Three Major Indicators Point to Lower Stock Prices
Profit Confidential weighs in on the stock market and explains why three indicators point to lower stock prices.
New York, NY, United States – August 21, 2015 /MarketersMedia/ —
Profit Confidential (www.ProfitConfidential.com) an e-letter of Lombardi Publishing Corporation, a 29-year-old consumer publisher that has served over one million customers in 141 countries, is weighing in on the state of the current stock market and warns that three indicators point to much lower stock prices.
“The downside momentum in the U.S. stock market is gaining traction. And unless the Federal Reserve does a complete about-face and launches QE4, the sell-off in stocks that started in mid-May of this year will accelerate,” says economist and lead contributor Michael Lombardi. “In fact, there are three very strong arguments for lower stock prices.”
Lombardi explains that the Dow Jones Industrial Average has been trading below its 50-week moving average for three consecutive weeks; this is the first time this has happened since 2011. Furthermore, the market’s momentum indicator, the moving average convergence divergence (MACD), has been trending lower since mid-2014—another negative for the technical health of the market.
Second, the yield on the Dow Jones Industrial Average is higher than the yield on the 10-year U.S. Treasury Note, which means investors can get a better dividend yield on big-cap stocks that they can get on 10-year U.S. Treasuries. This rarely happens; in fact, this has only happened a handful of times since 1981. And when it has happened, investors have experienced big market swings.
“Lastly, fundamentals of the stock market are in deep trouble. According to the most recent data, the vast majority of S&P 500 companies have reported their second quarter results. At present, these companies have experienced a one percent decline in earnings, which marks the first decline in profits since the third quarter of 2012,” Lombardi adds. “What’s worse, S&P 500 companies are reporting a massive decline in revenue to the tune of 3.3% in the second quarter. This is the first time since 2009 that sales for the S&P 500 have declined for two consecutive quarters.” (Source: “Earnings Insight,” FactSet.com, August 6, 2015; http://www.factset.com/websitefiles/PDFs/earningsinsight/earningsinsight_8.6.15.)
“The future continues to look weak with stock analysts forecasting corporate earnings to decline 3.6% in the third quarter and 2.4% in the fourth quarter of this year,” Lombardi concludes. “While it’s actually surprising it hasn’t been a worse year for stocks, the next few months could be devastating for them, unless, as said, the Fed goes for QE4 instead of its pledge to raise interest rates.”
For more information on Profit Confidential, visit www.ProfitConfidential.com.
Founded in 1986, Lombardi Publishing Corporation, which has served over one million customers in 141 countries, is one of the largest consumer information publishers in the world. For more information on Lombardi Publishing Corporation, visit www.LombardiPublishing.com.
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