{"id":18883,"date":"2019-09-14T03:14:03","date_gmt":"2019-09-14T03:14:03","guid":{"rendered":"https:\/\/thepatientinvestor.com\/?p=18883"},"modified":"2019-09-14T03:15:54","modified_gmt":"2019-09-14T03:15:54","slug":"sp-500-upside-limited-while-downside-risks-grow","status":"publish","type":"post","link":"https:\/\/thepatientinvestor.com\/index.php\/2019\/09\/14\/sp-500-upside-limited-while-downside-risks-grow\/","title":{"rendered":"S&P 500: Upside limited, while downside risks grow"},"content":{"rendered":"

Corporate profits (before tax) ticked up slightly in the second quarter of 2019 but remain below 2006 levels in real terms. The chart below shows corporate profits adjusted for inflation using the GDP implicit price deflator.<\/p>\n

\"Real<\/p>\n

Growth in production of durable consumer goods remains week, reflecting poor consumer confidence.<\/p>\n

\"Durable<\/p>\n

The chart below shows growth in bank credit and the broad money supply (MZM plus time deposits). Credit growth (blue) remains steady at around 5%, slightly ahead of nominal GDP growth (4.04% for 12 months ending June); a healthy sign. Broad money (green) surged upwards in the first three quarters of this year. Not an encouraging sign when there were similar surges in broad money before the last two recessions.<\/p>\n

\"Broad<\/p>\n

The S&P 500 is testing resistance at 3000. Bearish divergence on Twiggs Money Flow warns of secondary selling pressure. Expect a test of support at 2800. Breach would flag a reversal, with a target of 2400.<\/p>\n

\"S&P<\/p>\n

The cyclical Retailing Index displays a similar pattern, with resistance between 2450 and 2500.<\/p>\n

\"Retail\"<\/p>\n

Our view is that upside is limited, while downside risks are growing.<\/p>\n

On the global front, the outlook is still dominated by the prospect of a prolonged US-China trade war. More great insights from Trivium China<\/a>:<\/p>\n

Tariff delays may be aimed at creating warm, fuzzy feelings before the next round of talks in early October, but……These small gestures do nothing to resolve the underlying trade conflict. We\u2019re still pessimistic on prospects for a deal.<\/p>\n

Zhou Xiaoming \u2013 China\u2019s former top diplomat in Geneva \u2013 expressed the same view in a recent interview (Guancha):
\n\u201cThe two sides disagree too much on the objectives of the negotiations……It is almost impossible to reach an agreement in the short term.\u201d<\/em><\/p>\n

Zhou urged Chinese officials to be clear on the US\u2019s objective:
\n\u201cEconomic and technological decoupling is the objective of the entire US government.\u201d<\/em><\/p>\n

Zhou said that officials must prepare for that potentiality, even if it is not their desired outcome.<\/p><\/blockquote>\n

So should we.<\/p>\n

Dow Jones – UBS Commodity Index found support at 76 before rallying to 79. Rising troughs on the Trend Index reflect increased support. Consolidation between 76 and 81 is likely but we maintain our bearish long-term outlook for commodities.<\/p>\n

\"DJ-UBS<\/p>\n

On the global front, weak crude oil prices flag an anticipated slow-down in the global economy. Trend Index peaks below zero indicate selling pressure. Breach of support at $50\/$51 per barrel would be a strong bear signal, warning of a decline to $40 per barrel.<\/p>\n

\"Nymex<\/p>\n

We maintain our investment in quality growth stocks but have reduced equity exposure to 40% of (International Growth) portfolio value.<\/p>\n","protected":false},"excerpt":{"rendered":"

Corporate profits (before tax) ticked up slightly in the second quarter of 2019 but remain below 2006 levels in real terms. The chart below shows corporate profits adjusted for inflation using the GDP implicit price deflator. Growth in production of durable consumer goods remains week, reflecting poor consumer confidence. The chart below shows growth in … <\/p>\n

Continue reading “S&P 500: Upside limited, while downside risks grow”<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_mo_disable_npp":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[41,43,44,3761,3778,57,29,34],"tags":[3935,4118,881,898,4039,4117,4116,3010],"class_list":["post-18883","post","type-post","status-publish","format-standard","hentry","category-china-hk","category-commodities-gold-commodities","category-crude-oil-natural-gas","category-gdp-and-activity","category-international-trade","category-stock-markets","category-the-big-picture","category-us-canada-countries-regions","tag-broad-money","tag-corporate-profits-adjusted-for-inflation","tag-credit-growth","tag-crude-oil-2","tag-dj-ubs-commodities-index","tag-durable-consumer-goods-production","tag-retailing","tag-sp-500"],"yoast_head":"\nS&P 500: Upside limited, while downside risks grow - the patient investor<\/title>\n<meta name=\"robots\" content=\"noindex, follow\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"S&P 500: Upside limited, while downside risks grow - the patient investor\" \/>\n<meta property=\"og:description\" content=\"Corporate profits (before tax) ticked up slightly in the second quarter of 2019 but remain below 2006 levels in real terms. 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But growth in hours worked continues to decline, warning that real GDP growth is likely to follow. Easy monetary policy, far from boosting the economy, is likely to lead to stagnation. Tight labor\u2026","rel":"","context":"In "Banks & Interest Rates"","block_context":{"text":"Banks & Interest Rates","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/economy\/the-fed-banks-interest-rates\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":44390,"url":"https:\/\/thepatientinvestor.com\/index.php\/2023\/10\/01\/crude-lt-treasuries-dominate-markets\/","url_meta":{"origin":18883,"position":1},"title":"Crude & LT Treasuries dominate markets","author":"Colin Twiggs","date":"October 1, 2023","format":false,"excerpt":"The S&P 500 is headed for a large correction after breaking support at 4350. Trend Index below zero warns of rising selling pressure. The Equal-Weighted Index shows a far steeper correction, headed for a test of primary support at 5600. Breach of primary support would complete a double-top reversal, warning\u2026","rel":"","context":"In "China & HK"","block_context":{"text":"China & HK","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/countries-regions\/china-hk\/"},"img":{"alt_text":"S&P 500","src":"https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2023\/2023-09-29-spx.png?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2023\/2023-09-29-spx.png?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2023\/2023-09-29-spx.png?resize=525%2C300&ssl=1 1.5x"},"classes":[]},{"id":18333,"url":"https:\/\/thepatientinvestor.com\/index.php\/2019\/06\/08\/sp-500-short-term-versus-long-run\/","url_meta":{"origin":18883,"position":2},"title":"S&P 500: Short-term versus long run","author":"Colin Twiggs","date":"June 8, 2019","format":false,"excerpt":"The market is excited at the prospect of Fed rate cuts (in response to the US-CCP trade war), with the S&P 500 headed for another test of its earlier high at 2950. A Trend Index trough above zero indicates short-term buying pressure. Falling bond yields, however, warn of a flight\u2026","rel":"","context":"In "Banks & Interest Rates"","block_context":{"text":"Banks & Interest Rates","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/economy\/the-fed-banks-interest-rates\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":16204,"url":"https:\/\/thepatientinvestor.com\/index.php\/2018\/04\/26\/life-left-in-us-stocks\/","url_meta":{"origin":18883,"position":3},"title":"Life left in US stocks","author":"Colin Twiggs","date":"April 26, 2018","format":false,"excerpt":"According to market pundits, the latest stock sell-off was fueled by concerns over rising bond yields and slowing growth for Caterpillar (CAT). From CNBC: ....Caterpillar shares reversed lower during the call, when Chief Financial Officer Brad Halverson said first-quarter adjusted profits per share will be the highest for the year\u2026","rel":"","context":"In "Banks & Interest Rates"","block_context":{"text":"Banks & Interest Rates","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/economy\/the-fed-banks-interest-rates\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":47792,"url":"https:\/\/thepatientinvestor.com\/index.php\/2024\/01\/27\/solid-q4-gdp-lifts-sp-500\/","url_meta":{"origin":18883,"position":4},"title":"Solid Q4 GDP lifts S&P 500","author":"Colin Twiggs","date":"January 27, 2024","format":false,"excerpt":"Easy monetary policy is supporting a robust US economy but there are signs that growth is slowing and investors remain cautious. The S&P 500 is testing resistance at 4900 -- a new high for the index. Trend Index troughs above zero signal strong buying pressure. Expect retracement to test the\u2026","rel":"","context":"In "Banks & Interest Rates"","block_context":{"text":"Banks & Interest Rates","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/economy\/the-fed-banks-interest-rates\/"},"img":{"alt_text":"S&P 500","src":"https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2024\/2024-01-27-spx.png?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2024\/2024-01-27-spx.png?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2024\/2024-01-27-spx.png?resize=525%2C300&ssl=1 1.5x"},"classes":[]},{"id":9121,"url":"https:\/\/thepatientinvestor.com\/index.php\/2014\/02\/05\/commodity-prices-effect-on-corporate-profits\/","url_meta":{"origin":18883,"position":5},"title":"Commodity prices effect on corporate profits","author":"ColinTwiggs","date":"February 5, 2014","format":false,"excerpt":"Sharp spikes in the US Industrial Commodities PPI (producer price index) often precede a drop in Corporate Profits (expressed below as a ratio to GDP). And sharp falls in the PPI tend to precipitate a surge in profits. The 5-year chart above shows PPI growth close to zero since 2012.\u2026","rel":"","context":"In "Economy"","block_context":{"text":"Economy","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/economy\/"},"img":{"alt_text":"US Corporate Profits\/GDP compared to Industrial Commodities PPI - 5 Years","src":"https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2014\/corpprofits-industrialppi.png?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2014\/corpprofits-industrialppi.png?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2014\/corpprofits-industrialppi.png?resize=525%2C300&ssl=1 1.5x"},"classes":[]}],"_links":{"self":[{"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/posts\/18883","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/comments?post=18883"}],"version-history":[{"count":3,"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/posts\/18883\/revisions"}],"predecessor-version":[{"id":18886,"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/posts\/18883\/revisions\/18886"}],"wp:attachment":[{"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/media?parent=18883"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/categories?post=18883"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/tags?post=18883"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}