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The Friday release of the latest employment data makes the upcoming earning's season the focus of most investors and traders. Though most forecasters are looking for another quarter of negative earnings I think investors are more likely to see the first quarter of earnings gains in well over a year.Since September 9th and 12th the S&P 500 has stayed in a rather broad range as both the rallies and declines have not lasted long. The strength of the monthly market internals I discussed last week does favor higher prices at year end though October could be a tough market.wa10-7aThe recent scares over Deutsche Bank and the Thursday night plunge in the British Pound (see chart) have increased the fear level and reduced the appetite for stocks. There has been no heavy selling yet but it cannot be ruled out in the weeks ahead. The market internals were negative overall last week as the number of advancing stocks was not impressive even on the up days.In election years, unlike the rest of the time, October is not a good month for stocks. According to the Stock Trader's Almanac since 1950 the S&P has averaged a 0.7% decline in election years. But since 1950 the S&P 500 in October has been higher 41 years and down 25 years with an average return of 0.80%.In addition to the large number of bearish hedge fund managers Bank of America's Savita Subramanian expressed her negative outlook last week as they have a yearend target for the S&P 500 at 2000. Though none of her most reliable indicators are warning of a recession she is worried about complacency. It should be noted that she has often been too negative during the bull market.Still there are several analysts that feel the odds of a bear market is low as they also feel the lack of euphoria amongst investors (What's Missing From This Bull Market?) is not characteristic of a major bull market top.In a Bankrate article they quoted S&P's Sam Stovall "All bull markets since World War II that lasted longer than 4 years went out with a bang, not a whimper," he explains. "Investors will likely become overly confident, not cautious, before this bull comes to an end." I also find the current low level of public participation to be uncharacteristic of a bull market top.Of course one of the primary arguments against the bull market is that stocks are two expensive. Many point to CAPE P/E formula developed by Robert Shiller that uses S&P earnings. As discussed in last week's Wall Street Journal article it is currently at 27 which was close to the reading at the 2007 market top.
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