Robert Hsu: It certainly seems as though the political gamesmanship that rules Washington, D.C., also rules the markets. But this isn’t really the case.
In fact, there’s one single “magic” number that far outweighs everything else when it comes to long-term influence.
This number’s predictive power has saved me from some of the steepest market drops of the century, and it’s given me everything I need to position myself for maximum gains in bull markets.
And the best part is, it’s widely available – access to it costs nothing.
It’s how you use this simple number that counts…
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Earnings season is the key to it all. That’s when over half of all public companies report the revenue and earnings results for the previous three-month period.
Here’s where the number comes in. You can track these earnings with a metric called the trailing 12-month earnings per share (EPS).
You can always find it right here, over at Barron’s.
At a single glance, it tells you whether earnings are trending higher or lower. Staying ahead of that trend is the key to beating the markets.
The number, the current aggregate EPS of the S&P 500, is $90.95.
This metric is incredibly accurate, and historically speaking, when earnings increase in the aggregate, stocks tend to go up in the aggregate. Of course, you might see an individual stock sell off after it reports rising earnings, and conversely, you might see an individual stock rise on downbeat earnings. Yet, by and large, when corporate earnings are rising, stock values also rise. The reverse is also true: When earnings are in decline, stock prices also decline.
But when you have the aggregate EPS in hand, you can prepare for these declines.
Get Ahead of Bear Markets
This happens rarely, but when the aggregate measure of earnings on the S&P 500 declines for two consecutive quarters, the market is telling us to sell. This has only happened twice this century – so far – once in January 2001 and again in October 2007.(...)Click here to continue reading the original ETFDailyNews.com article: Getting Ahead Of Bear MarketsYou are viewing an abbreviated republication of ETF Daily News content. You can find full ETF Daily News articles on (www.etfdailynews.com)
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