Market Update:
Wednesday was the first day we saw a little selling emerge since Brexit. The operative word is “little” as the market still remains very strong. The selling yesterday came from Gold/Silver stocks and from biotech/healthcare. Biotechs and healthcare stocks fell after Mylan ($MYL) hiked prices for their EpiPen by 600%. Why any company would raise prices on a drug this close to the election is beyond me, let alone by 600%! Lousy judgement doesn’t even begin to describe it. The $IBB, the biotech ETF, fell after flirting with resistance ($300) and is still range-bound.
Looking at the market, the action still remains healthy. The market is trading in a relatively tight trading range over the past 3-4 weeks as it continues to consolidate a very strong 10% post brexit rally. Near term support in the S&P 500 is 2,168. As long as that level holds, the bulls remain in control. GDP will be released before Friday’s open and Yellen will give a speech shortly after the open. I believe she has two speeches prepared, one if GDP beats and another if GDP misses. The recent drift lower might be the market’s way of “pressuring” the Fed to remain dovish. Barring some large unforeseen event, I do not think the Fed will raises rates before the election. For nearly two years, the Fed has been flirting with a rate hike and when push comes to shove, they back off and just kick the can down the road. I believe they are doing the same thing ahead of September’s meeting.
Back to the market, if support breaks, the next level to watch is the 50 day moving average line for each of the major indices. Remember, one or two “up” days could easily send the market “topside.” Also, on a closing basis, the S&P 500 has closed near 2183 in each of the past 4 weeks. It will be interesting to see where it closes tomorrow. As always, we will have a full report for you this weekend.
FLS Portfolio:
The FLS portfolio was stopped out of GDX yesterday at the open for a small loss. As of (Wednesday’s close):
- The service owns:QQQ +5.37%, SMH +11.83%, XLF +0.97%,BLK -0.10%
- The service will exit: QQQ @ 110.85, SMH @ 58.65, XLF @ 22.37, BLK @ 352.79
Working Orders:
There are no new orders today
Q2 Earning Season Recap:
Now that earnings season is mostly over. Here are is a recap for your review. As you can see, the data was less than stellar:
- Earnings growth for the SPX the second quarter is -2.6% vs expectations of –2.2%
- Worth Noting: Earnings growth for the 391 non-financials that have reported is -1.5%
- Revenue growth for the SPX the second quarter is -0.2% vs expectations of 0.04%
- 483 (96.6%) companies in the S&P have reported Q2 equivalent earnings
- 5 (1.0%) companies in the S&P will report earnings next week
Q2 Earnings Summary:
- 72.3% have POSITIVE EPS surprise
- 10.6% have NEUTRAL EPS surprise
- 17.1% have NEGATIVE EPS surprise
- 62.3% have HIGHER EPS year over year
- 3.7% have NEUTRAL EPS year over year
- 34.0% have LOWER EPS year over year
Q2 Sector Performance (percentage of Positive Surprise):
- Healthcare: 85.5%
- Information Tech: 83.4%
- Consumer Staples: 78.8%
- Consumer Discretionary: 72.4%
- Industrials: 71.6%
- Financials: 68.5%
- Energy: 60.5%
- Telecom Svcs: 60.0%
- Utilities: 58.6%
- Materials: 57.7%
Disclaimer:
This analysis contains information from resources believed to be reliable but are not guaranteed as to accuracy or wholeness as of the date of this publication. Past performance is not necessarily indicative of future results. There is always a risk of loss in trading and investing. Opinions articulated are subject to change without notice. This analysis and any opinions expressed are intended for educational purposes only and should NOT BE interpreted as a call for engagement in any transaction involving the purchase or sale of any security or investment product or service. The risk of loss in investing and or trading can be substantial, and traders/investors should carefully consider the inherent risks of such an investment in light of their financial condition. The author, firm, associates, or the firm’s clients may have a position in any of the investments mentioned and their positions are subject to change without notice. Any reproduction or retransmission of any portion of this report without the express written consent of Sarhan Capital is strictly prohibited.
