Tempting Tuesday – 2,100 and Bust Again?

Are we there yet? 

Barron’s doesn’t think so but, this morning, the Chinese markets fell 12.5% in seconds, erasing 3 months of gains but immediately (same minute) recovered and finished the day up 2.5%, for a 15% intra-day swing.  Overall, China’s CSI 300 is down 16% for the year so, technically, not a bear market – yet.    

Of course, we started the year 30% off the highs so, technically, it’s totally STILL in a bear market.  Interestingly, short interest on China’s ETF (FXI) climbed to record highs last week – just ahead of this morning’s test crash.  Yes, I said test crash because that’s what these “flash-crashes” tend to be – some program spiking the bottom to see where the real buyers are so they can set up their cascading sell orders for the month ahead.  

I know – yawn! – China’s a mess, Japan’s a mess, Europe is toxic and perhaps about to fall apart, oil is barely holding $49.50 after the busiest driving week of the year… so what?  We’ve had the same concerns for ages and we’re STILL at 2,100 – testing the record high for the S&P 500.  While that’s true, couldn’t you say the same thing about a car that’s about to fall apart but making “record” mileage?  You KNOW it will die one day – just maybe not today.  

Check out the also record-high price to sales ratio on the S&P 500.  Never before has so much money been paid for so little actual sales.  We are now paying 20% more for Corporate Revenues than we did before the last collapse and about 130% over the historic average.  That seems like a lot, doesn’t it?  Of course, never before have the books been manipulated to the extent they are today, with a record 58% of the S&P companies reporting non-GAAP numbers this year.  

If you listen to analysts, Q2 earnings are the trough and Q3 and Q4 should be much better, which is good – because they can hardly get any worse, can they?  Of course, now that we’re done with Q1 earnings reports, we’ll begin to get those crappy…

Provided courtesy of Phil’s Stock World.