Raymond Chung's  Instablog

Give credit to the bulls.  For the last six months, most economic indicators and corporate earnings in aggregate have been in their favor.  Economic data has become less and less bad, and many companies have either beaten lowered earnings expectations or achieved trough earnings (at least in the near-term).  For example, the ISM Manufacturing Index has been in an uptrend since bottoming in 4Q 2008, and is now at 52.6.  As far as earnings, it really did not matter what companies reported or guided in 1Q 2009 or 2Q 2009; both positive and negative news were bought based on the widespread belief that the bottom was close.

 

However, in the last couple weeks, chinks in the armor may be appearing.  Economic numbers are more frequently coming out less than expectations, and reactions to recent earnings and guidance have shown that investors are now willing to sell.  This increase in less than stellar data and investor reactions should be monitored.  If this pattern continues, a tipping point could be approaching.  As we all know, the market does not ring a bell at the top or bottom.  Ultimately, additional information and time will tell.  But for now, the latest observations do suggest that a pause in this tremendous bull move from the March lows could be forthcoming.

 

Economic indicators less than expectations: