S&P 500 Earnings Data Won’t Call a Market Top

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Stocks Analysis by Brian Gilmartin covering: S&P 500. Read Brian Gilmartin's latest article on Investing.com

earnings data for the last 20 years, it’s important to reiterate or at least remind readers that monitoring S&P 500 EPS data, won’t necessarily call a lengthy market top for the main stock market benchmark.

S&P 500 earnings are – at best – a coincident indicator, and probably more of a lagging indicator relative to the benchmark itself. There was a noted market technician at the time named Elaine Garzerelli who I think was at Lehman Brothers, who may not have called the exact top but the she got the firm’s clients out of the stock market who wanted to market time, for that fateful October 19th drop.

2001 and 2002 was a growth stock, tech stock, and large-cap correction, while 2008 was a broader, recession and residential real-estate driven correction,and energy correction. In September of 2014, crude oil was priced around $80 – $90 per barrel, but by January – February, 2016 it bottomed at $28.50 per barrel, and the energy sector, which was 14% – 15% of the S&P 500’s market cap in September, ’14, had fallen to 4% of the S&P 500’s market cap by Q1 ’16.

With the March, 2000, market top for the S&P 500 and the Nasdaq, I don’t think anyone suspected that the S&P 500 wouldn’t make a new all-time-high until May, 2013, and that the Nasdaq would drop 80% in the ensuing two years.

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