Market uptrend has been broken
Wall Street can no longer deny deteriorating economic fundamentals and corporate earnings as technical indicators roll over.
The new downtrend accelerated Thursday as the S&P 500 ($INX) closed below its 50-day moving average for the first time since December on another batch of disappointing earnings reports (with the technology and financial sector getting hit hard) and poor economic data. The April Philly Fed manufacturing report fell to 1.3, well below consensus, on poor employment and new orders.
Globally, there was chatter that a French bank was in trouble, ongoing political stalemate in Italy and a focus on the upcoming G-20 finance summit in Washington to see whether the world issues a warning to Japan on its efforts to devalue the yen.
It's a full-spectrum assault on the bulls. And as a result, Wall Street analysts have no choice but to start issuing warnings to clients -- creating a self-feeding cycle of selling and fear.
On the earnings front, there's a lot of red. Technology and financial stocks are getting hit hard as first-quarter results roll out, resulting in major weakness in these sectors and pushing them down to join with already weak materials and energy stocks.
Both Bank of America (BAC) and Morgan Stanley (MS) were hit earlier this week on disappointing results. EBay (EBAY) dropped nearly 6% Thursday after it guided lower and made negative comments about its European business. Nokia (NOK) was hammered 11.5% after missing on revenue. IBM (IBM) is getting hammered Friday after posting a rare top- and bottom-line miss as services revenue is cut back.
You'll remember that IBM, as the largest component in the price-weighted Dow Jones Industrial Average, was responsible for that index's melt-up in early March. Now the bulls are experiencing IBM's outsized influence on the Dow, but in the opposite direction.
But the big story is how Wall Street analysts are slowly realizing that the deteriorating trajectory of both corporate earnings and the economic data can no longer be ignored. As the strategists at the big brokerages sound the alarm, investors are pulling the plug on stock positions. Here are some excerpts:
UBS: "Since mid-November the market's advance has been out of sync with weak earnings and economic trends (consensus GDP is for 2% growth in 2013). More recently, a number of market indicators that typically move with equities have begun to point south. These include economic surprises bond yields, inflation expectations, commodity prices, and investor sentiment. Now is a good time to begin dialing back on risk."
Bank of America Merrill Lynch: "We think markets may be under pricing three macro risks: The ability of Beijing to ease policy aggressively in the face of strong home price appreciation may be limited; the positive wealth effect of US housing recovery may not be enough to offset the contractionary impact of fiscal tightening; Japanese money may stay at home longer than expected."
Barclays Capital: "The S&P 500 sits 120 bps off its all-time high close, but simmering under the surface are global growth concerns, propped up by monetary policy forces. The questions remain if the market can hold up in the face of a soft growth outlook. [E]xpect a challenging environment for US equities over the coming months."
Morgan Stanley: "The expected 2Q growth soft patch is now arriving…"
I maintain my bearish bias as the rest of the world slowly starts to realize that maybe, just maybe, they had become overconfident and complacent. In response, I am adding another short position to my Edge Letter Sample Portfolio: Blackberry (BBRY).
Disclosure: Anthony has recommended BBRY short to his clients.
Check out Anthony's new investment newsletter, the Edge, and his money management service, Mirhaydari Capital Management. A two-week free trial has been extended to MSN Money readers. Click the link above to sign up. Mirhaydari can be contacted at firstname.lastname@example.org and followed on Twitter at @EdgeLetter. You can view his current stock picks here. Feel free to comment below.
Now, for those of you who like to troll and criticize, put your money where your mouths are and give us your picks, so we can see how fantastic you really are.
As for me, for now, I'm bullish on the Euro against the USD. Next week, if we can get any kind of a bounce in US stocks, I see the Euro pushing 1.315.
I think that Anthony is his own worst enemy. He's trying to convince everyone that the markets are going to drop and spread fear. He thinks that the sooner he can spook the herd the sooner his predictions of a meltdown will come true. The problem is, he has been saying this for months and months and the market keeps going up. I think that there's a certain amount of people who seriously think "Anthony is out with another doomsday column.... chuck some more money into the furnace!" It's almost become a sign of prosperity. If he'd just put a cork in it for awhile then the small percentage of investors (and brokers, planners, etc.) who pay attention to MSN money columns would be forced to examine things for themselves. They'd be scared by what they see (on their own) and they'd feel the honest-to-goodness fear that they should be feeling. Anthony has become a warm and dependable plate of comfort food for those who keep dumping money into what's becoming a bubble.
This guy is absolutetly clueless , I mean you need to realize that markets tend to go up and up and eventually it will come down some before the next leg up , Economy is slowly recovering and easing is done all over the world . Anthony you cant be guessing wrong for another 6 months or so , Read the fundementals and watch and learn .
Being a Bull or a Bear is not really a problem...
Being a Perma Bull or a Perma Bear, isn't usually all that bad either..
But being a "Chicken Little" is usually a WHOLE DIFFERENT STORY..
Wasn't that something to do with Mother Goose...??
And those kind of intentions, REALLY have NOTHING to do with INVESTING....imo.
And are not WORTH following..
"Disclosure: Anthony has recommended BBRY short to his clients."
I'm surprised Anthony has any clients left that aren't bankrupt...considering all his "Epic" forecasts that have fallen flat.
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These companies won't soar like other plays in the sector, but they make for great income sources.
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