All eyes are on company earnings as the stock market has overshot to the upside

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All eyes are on company earnings as the stock market has overshot to the upside, says TheAroraReport

Let us explore the issue with the help of a chart.

• The chart shows the Arora buy signal given on Christmas Eve. In hindsight, the Arora buy signal was given at the exact low of the present cycle. Since the Arora buy signal, the stock market has jumped about 23%.• Earnings are the single best determinate of future stock prices. • Progress in China trade talks has helped, but in our opinion, the Fed’s policy has been the main driver of this rally.

This does not mean that investors should sell stocks wholesale. The reason is that the market is controlled by the momo crowd. The momentum is to the upside. The momentum can easily carry the market to new highs. Many short-sellers likely have stops above the old highs. If the old high is taken out, these stops will trigger more upward pressure on the stock market.

 

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