The Citigroup Economic Surprise Index sends a warning
Timely post by The Pragmatic Capitalist. This is essentially a study of analyst expectations vs. actual earnings. And right now we are at historically high levels that have typically accompanied corrections.
I think we are due (overdue) for a turn down. Like I have said before, whatever top we find here I am highly doubtful it is 'the top' before the next cyclical bear (see Macro Thoughts and Observations. Is the Bear Market Dead? Is this the Start of a new Secular Bull Market?, I am thinking something on the order of a ~10% correction. But this market needs to correct badly for the short term.
15 February 2011 by Cullen Roche
It’s often useful to compare market expectations to reality. After all, a market is not built solely on fundamental realities, but how broadly those realities are expected by investors. When expectations are high there is the likelihood for disappointment. When expectations are low there is a potential for upside surprise. This has been most apparent in my Expectation Ratio which has been consistent with a dramatically improving earnings environment since mid 2009.