Out Fox The $treet

Even though a lot of the small cap growth stocks still struggled, the Russell 2000 Small Cap Index closed above 1,000 for the first time. The index has surged after trading below 750 last summer. As the below chart shows, the index appears headed even higher as a breaks out of the recent range. Disclosure: No positions mentioned. Please review the disclaimer page for more details. 

Earnings records were a big focus in the first part of 2011. Most analysts debated whether the SP500 would report 2012 earnings 5,10, or 15% above the record numbers already expected in 2011. Slap a 15 multiple on those numbers and estimates for 2012 could easily hit 1,500 to 1,650. Fast forward to a rough summer with heightened fears of another recession as 2011 ended and the focus on the record earnings disappeared. Hardly anybody discusses earnings anymore. It was interesting to see this Investment News article where David Cote of ING forecast 7% earnings growth in 2012 to $105. Slap a 15 multiple on those estimates and the SP500 could reach 1,575. That would be right around the record high. This number is nowhere near the $110+ estimates from the Spring time period, but very noteworthy that analysts are now looking past the recession fears and forecasting a solid '12. If the market could ever return to a focus on fundamentals, this market would rocket higher. The Europea...

Though the major indices floundered today with the Dow even closing down, the better diversified and reflective indexes were up very strong. The Russell 2000 was up 1.8% while the SP400 Midcap was up over 1%. Also, both the Nasdaq and NYSE had solid internals with roughly 70% of stocks up today. Honestly not sure what to make of a market where the average stock soared while the huge mega caps were basically flat to down. The Russell 2000 had a solid bounce off the 200EMA which would normally be very bullish. The SP500 closed another poor week closing below the 200EMA. Most of the smaller caps appear to have broken the downtrend with former leaders like Goldman Sachs (GS) and Freeport McMoRan (FCX) breaking above the 20EMA while recent leader Apple (AAPL) struggled. With FinReg basically done and China leading towards a soft landing its very possible that these past leaders regain there form. The real question is whether AAPL along with other techs will keep recent gains. Or are we just...

Its long been known on Wall Street that Transport typically lead market breakouts. Today the Transport Index broke above recent resistance around the 4100 level and signaled a clear breakout. More from FundMyMutualFund on this subject. It clearly supports our case that the market is about to breakout of a range between the 1,085 and 1,110 on the S&P500 that its been stuck in for the last 5 weeks or so. A clear move in any direction after such a consolidation will likely be very powerful. Possibly running all the way to 1,200 before stopping. Confirmation tomorrow will be key. As you can see from the below chart, the SP500 has made a clear new high close and any run tomorrow could easily post a new intraday high as well signaling a clear breakout following the Transports. A close above 1,120 sinalling the all clear for computer programs and hedge funds.

Not really that surprising as countries like China and India are doing exceptionally well and the US is catching up. The other comment on earnings reaching $80 on the S&P500 next year surprised us. The market only trades at a PE of 13.7 making it suddenly cheap. How many go on TV claiming this market is the most over valued in a long time? Corporate profits have been a lot stronger then most expected. Just think, at the start of 2009 the US was in the worst economy since the Great Depression and yet before the year is over SP500 profits are back to $80. Thats incredible! “Equity markets should rise again next year driven by strong earnings growth. Our $80 S&P 500 EPS forecast for 2010 is 27% higher than this year’s $63, implying a much faster rise in earnings than nominal GDP, i.e., an expansion in profit margins. Our forecast suggests that by the end of next year, US profit margins are likely to approach the historic highs reached earlier this decade.” This earnings assumpti...

You can't watch a clip on CNBC or Bloomberg or read an article on numerous websites without somebody talking about a correction in September. Even SeekingAlpha has a focus on buying gold to protect from the 'inevitable' downside. Guess the market got that start on the 1st day with the SP500 down over 2% and then over 0.5% soon after the bell on the 2nd day. Every poll I see the pollsters expect a much larger chance of a large drop rather then a large gain in September. The action on the first just seems overly convenient to suck in the shorts that have been expecting a huge sell off and Monday was there confirmation. But is that what will actually play out? Watching Fast Money last night I was appalled and then delighted to see that they featured the PermaBear trio of David Rosenberg , Peter Schiff , and Roubini . One decent down day and they pull all the stops on the negative side. Though I do agree with Schiff in that investing outside the US will see better returns he...

Unfortunately our portfolios weren't set up for an oversold condition in the market, but when the indicies drop 2.5% because the World Bank declares that the world GDP will be worse then they expected back in March you know the market has reached near term lows. More likely the market just wanted to take the path of least resistance down to the 50EMA around 897. Moving below 900 scares alot of people but it typically means nothing. Just about anybody following the market knows that the world economies have stabilized dramatically since March so any group claiming worse numbers now is because their system is using lagging indicators for prediction. Most leading indicators are up dramatically. Just over a week ago, we were looking for a breakout on the SP500 above the 940 range to signal a opportunity to make a bullish run to the 1,200 level. Well that didn't happen and looking back it probably isn't that surprising that the market took this chance to retest some levels and ...