Thursday, 27 October 2011

S&P 500: Earnings Winners, Losers and The Technical

Stock indexes rallies on Wed. Oct. 26 after Agence France-Presse reported that China has agreed to invest in Europe's financial rescue fund to aid the debt crisis, and EU leaders said they reached an agreement on a plan to recapitalize banks. The strongest U.S. business core capital goods order in six months also helped buoy stocks.

The S&P 500 index rose 12.95, or 1.1%, to 1,242. The index has rallied 9.8% in October, after a five-month decline. Dow and Nasdaq also advanced 1.4% to 11,869.04, and 0.5% to 2,650.67, respectively on the day.



Bloomberg reported that about 75% of the S&P 500 companies that reported results since Oct. 11 beat analysts’ earnings projections, and that data from the Harrison, a New York- based research firm, indicating about 90% of the stocks in the S&P 500 index are trading above their 50-day average, the most since Oct. 18, 2010.

The two tables below from Bespoke Group show the best and worst performing stocks in the S&P 500 on earnings this season. Netflix (NFLX) leads the pack of losers with a one-day decline of 34.90%, while Harman is the champ of winners with a 20.55% one day gain.

The index strong momentum has prompted Credit Suisse to predict S&P 500 might to as high as 1,272 within the next two weeks, a 2% gain from today's closing. According to BusinessWeek dated Oct. 24,
"Credit Suisse recommended buying the S&P 500 at 1,227 to 1,222 and selling at 1,260 to 1,270. If the gauge doesn’t rise, the bank advised investors exit the strategy at 1,214.
Right now, it looks like the U.S. will be able to stay above the recession line. From that perspective, and since the index broke above a major resistance level of 1200, coupled with the coming holiday Christmas rally, we see the S&P could test 1300, and very well finish the year above 1300, with strong resistance around 1350, based on our own technical analysis (see chart above)..

After the New Year, there could be some profit taking in the spring to pull the index back to 1250 levels, unless there are strong economic data and/or very good news coming out of Europe. On the downside, 1200 is the next support level, with major support at around 1100. If it breaks 1100, look out below and time to pack up and leave the building.

Further Reading:

Netflix: Hell Has No Fury Like Subscribers Scorned
U.S. Earnings Season Beat Rate at 64%: So Far So Good





Chart Source: Bespoke Group, Oct. 26, 2011


by: EconMatters

Source: http://www.econmatters.com/2011/10/s-500-earnings-winners-losers-and.html?

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