Earnings-season conference calls remain fresh on the brain. Through the investing years, in addition to jotting down clues on future company performance offered in a live webcast, I've copied down my fair share of borderline-useless corporate jargon -- and if you are as meticulous and intense as I am, you've done it too. I have an endless supply of ridiculous-sounding words and terms in the old noggin, spewed by MBA grads now responsible for running large, publicly traded ships. Unfortunately for this fella, such jargon --which is worthy of its own finance urban dictionary -- has crept in to a date or two. It's sad, but oh so true.
Perhaps the most commonly mouthed term is "high-level information." I always know when a bigwig is preparing to drop this classic line. Their voice lowers an octave and it seems as if they sharing super-special, nonmaterial public information at the bar. Obviously, none of the information is high-level and special, seeing as a good amount of it can be stripped from the 10-K form that had been filed with the SEC earlier in the year.
In any case, I present to you a high-level sharing-is-caring episode. Today marks day three in my more bearish tone on the market. It hasn't been too shabby a call, huh? Since I've been around the block with this market-forecasting thing (stocks rallying, enthusiasm high), allow me to first provide a wee bit of color on what stands to happen next.
1. More strategists begin to talk out of both sides of their mouths. I'm paying extreme attention to words and actions -- thank you equity-research training class, and Mom -- and I'm hearing the following. The outlook for stocks looks great for the medium to long-term, but near-term the market may be in overbought territory, at risk for a 5% pullback, overextended or some other variation. Stealing a tagline from those "straight talk" wireless commercials, there is a higher probability for you to lose money in the coming weeks than there was last week. Watch the "buts," my friends.
2. A mild retrenchment is supposedly healthy, and a close below the best S&P 500 level since May 2008 is normal, as stocks have galloped hard and fast from June. That's funny -- I seemed to have missed the correction chatter a week ago, when complacency was cool to imbibe. You would want to see the S&P 500 close above key resistance on the slightest touch of stronger volume in what has been a volume-light upside advance. Like I said Tuesday -- book a profit, and begin to reload your list with fresh ideas.
Now, on to the high-level insight, some of which I have sent in piecemeal via Twitter (@BrianSozzi) during dark -- i.e., nighttime -- periods of the day.
1. Profits are being booked as a major index crosses and falls below a key level. This is a message that valuations are stretched. The market, at least presently, is growing scared that it's not properly being compensated for any number of risks it has chosen to brush aside for two months.
2. We're seeing smaller gains, or outright losses, in what were relative outperformers during the fundamental-less rally. (These companies, on balance, reported strong second quarters.) A prime example is Target (TGT).
3. Important indicator stocks on the global economy are stuck in the mud or lacking a bullish bias. FedEx (FDX) and UPS (UPS) are playing in the mud, and General Electric (GE) is searching around for its next move despite an upward-sloping tape.
4. Wall Street has turned bullish on the consumer-discretionary sector following the July employment and retail sales reports. I say we should chill and respect the sweet nothings being whispered by Visa (V), which has been weak since early August, as well as American Express (AXP) and MasterCard (MA); which have both been weak since early July. Price leads fundamentals, no?
There was a random attempt at assuming the role of hero on Apple (AAPL) Tuesday, with one shop downgrading its rating to a hold. Hey, I have done this myself in terms of going contrarian for "valuation" reasons. Personally, I continue to be bullish on Apple. But this isn't so much simply because of a sexy product cycle, but due to what that product cycle is likely to create: a perpetual state of rising dividends to accompany a strong earnings growth profile. Here's some more on that (video link).