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Slump, Slump! Company news isn't good these days.


Mercury

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Even with analyst expectation low company news isn't great.  Here is an excerpt from Hargreaves Lansdown this morning -

 

"In company news, Renishaw's shares fell after the engineering company issued a profit warning due to a downturn in Asia.

Next slumped after warning the year ahead could be the toughest since 2008 as it reported is full year results. The fashion retailer issued new guidance for 2016 that includes the possibility that profits could decline as much as 4.5%."

 

What caught my eye about this is the reference to Asia (I believe China economy in particular is worse than official figures) and China is still seen as the global hope...  In addition the news at home is not great with Next, a darling of the 2009 to 2015 bull market, giving negative guidance.

 

If you are a fundamentals follower, which I'm not, then this bodes ill.  The last vestige is the "bad news is good news" brigade who will be calling for even more central bank stimulation.  But here's the think about that, at some point it stops having any effect and in fact signals a greater worry, that the global economy is about to slump.  If you are virtually giving free loans and consumers are not taking them, the same consumers addicted to their credit cards for the past 15 years or so, there there is a problem.  If companies are taking them and instead of investing in their company they are doing high priced M&A and share buybacks then there is a problem.

 

In short, I may not be a fundamentals trader but I do like a strong narrative behind my technical analysis.  Contrarian traders aim to identify trend changes, which are driven by sentiment change in the market and for that you need a narrative.  I think I have one...  What's your?

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