Medicine for a flat market
Despite some big swings both up and down, the market has very little to show for itself for 2015. The S&P 500 fell 3.6% in January, rose 4% in February and is looking to be slightly negative in March. This market is threatening to post its first quarterly loss since Q4 2012 and this is only the 6th quarterly loss since the bull market began in 2009.
S&P 500 earnings are now forecast to be down on year over year comparisons. The decline in earnings from large companies is due to an evaporation of earnings from the energy sector. Despite the woes from energy, other industry groups are showing only muted gains, according to S&P forecasts. Indeed the next three quarters are likely to show negative year over year earnings comparisons from the largest US companies.
Disappointing earnings are likely to limit gains for the market as we move into the second quarter of this year. It appears unlikely that the market is poised to get above its recent highs of 2100 on the S&P 500 index.
In the meantime, trading opportunities continue to brew amongst individual stocks. Many of these could eventually end up being solid long term investments. This would always be a chief hope for anything we invest in. But when the overall market has no traction, we might have to wait too long for these investments to come to fruition. If stocks continue to consolidate in a bandwidth, we want to take advantage of this condition and buy the lows and sell the highs. While we wait for the market to meander, profitable trading is the medicine that we need for assets to grow.