There's a market maxim: Bulls make money, Bears make money, but P.I.I.G.S get slaughtered. The narrative over the past few months has been headline driven by news from Europe, but this isn't anything recent as “Greece” has been the word for over a year now. Not to be outdone, Italy dominated the financial headlines thus far this week, and perhaps next week Spain sheepishly will regain the spotlight. I have no pretense I can make heads or tails of this, but one thought did pop up today as I found myself looking at some recent earnings as well as the SPX YTD and recalled a passage from Tom Dorsey's Point and Figure Charting.
The market of 1994 has been dubbed the “stealth bear market.” The indexes were holding up, coming in even for the year, but the sector rotation in the market was unbelievable. As one sector was getting hit, another was recovering from its sell off; the effect of this was to cancel each other out in the broad market indexes. However, individual stocks and many investors did not fare as well.
Looking at the SPX, YTD -1.37% as of today. Coming into the close of the year the index is basically where it started the year.
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| SP Year To Date |
What struck me from observing earnings this season is how swiftly those with poor earnings or perceived poor earnings are getting punished. This theme is evident today from the charts of ROVI and NILE, both taking 30% cuts. Whether or not the 2011 year closes out analogous to 1994 with earnings playing the predominant roll remains to be seen, but the tone is being set.
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| ROVI After Earnings |
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| NILE After Earnings |
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