Bear Market “Radar” on High Alert

Bear Market “Radar” on High Alert

Bear Market “Radar” on High Alert

$DIA, $SPY, $QQQ, $VXX

The US Securities and Exchange Commission is set on putting a stop to the accounting methods that artificially inflate company profits.

According to an industry notice he SEC is getting ready to step up its scrutiny of companies’ “homegrown earnings measures,” signaling it plans to target firms that “inflate their sales results and employ customized metrics that stray too far from accounting rules.”

The SEC is finally waking up to the misleading picture that pro forma earnings, compared to generally accepted accounting principles, or GAAP, generate. Now the Commission is launching a campaign to crack down on wat are dubbed, “made-to-order” earnings.

The Chief accountant of the SEC’s corporation finance division, said, “The point is, now the company has created a measure that no longer reflects its business model. We’re going to take exception to that practice.”

The Big Q: So what will the SEC do?

According to the Dow Jones article: The agency plans to issue comment letters in the coming months that critique firms that booked revenue on an accelerated basis.

The regulators plan to challenge companies that report their adjusted earnings on a per-share basis. The results are often higher than per-share GAAP earnings and look too much like measures of cash flow, which decades-old rules prevent from being presented on a per-share basis. That is because investors could confuse cash flow with actual earnings, which truly represent the amounts that could be distributed to investors.

Former President of the Federal Reserve Bank of Dallas, Richard Fisher, offered this advice last week: “I would be prepared when they move, and I hope they move sometime in June, there a be a settling in of the market place. There will be a correction. Suck it up. Deal with it. That’s reality.”

And if the Fed does what it signaled today that it may raise the fed funds rate 1/4 pt in June then the herd will be running for the exits.

Note: the smart managed money is in cash now, it knows that cash is an asset.

That being the case, my Bear market radar is on high alert, and the new SEC rules will end this 86 month old Bull Market, the correction could be as deep as a 55% Fibo retracement. Be prepared.

Tuesday’s US major stock market indexes finished at: DJIA -180.73 at 17529.98, NAS Comp -59.73 at 4715.73, S&P 500 -19.45 at 2047.21

Volume: Trade was heavy with over 1.2-B/shares exchanged on the NYSE

  • NAS Comp -5.8% YTD
  • Russell 2000 -3.0% YTD
  • S&P 500 +0.2% YTD
  • DJIA+0.6% YTD
HeffX-LTN Analysis for DIA:  Overall Short Intermediate Long
Neutral (-0.11) Neutral (0.07) Bearish (-0.42) Neutral (0.00)
HeffX-LTN Analysis for SPY:  Overall Short Intermediate Long
Neutral (-0.13) Neutral (-0.04) Bearish (-0.42) Neutral (0.06)
HeffX-LTN Analysis for QQQ:  Overall Short Intermediate Long
Bearish (-0.33) Neutral (-0.22) Bearish (-0.38) Bearish (-0.40)
HeffX-LTN Analysis for VXX: Overall Short Intermediate Long
Neutral (-0.24) Neutral (-0.09) Bearish (-0.30) Bearish (-0.33)

 

Stay tuned…

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Paul Ebeling

Paul A. Ebeling, polymath, excels in diverse fields of knowledge. Pattern Recognition Analyst in Equities, Commodities and Foreign Exchange and author of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly regarded, weekly financial market letter, he is also a philosopher, issuing insights on a wide range of subjects to a following of over 250,000 cohorts. An international audience of opinion makers, business leaders, and global organizations recognizes Ebeling as an expert.

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