Good results = share price falls, bad = a hammering! big correction due?

14th Mar '18 by john652

9 comments 4325 reads

Hi all,

Seems the market has shifted to me, most good news is being marked down, bad news is hammered. Only exceptional news seems to move the price. I’ve been stopped out more times this month than for years. Lots of studies show small cap weakness before a large correction, is thus just noise or not? My cash, not just from stopped positions is large, again largest for years. Anyone else feel same or different or have experience of this type of market?

John

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About the Author

John652

Premium Member

9 comments

Mechanical Bull

14th Mar '18

Yes, I have noticed this too. XLMedia and Computacenter released pretty good results yesterday and were marked down. Sportech's results were released this morning - They were pretty disappointing but have got absolutely clobbered.

Howard Marx

14th Mar '18

"Lots of studies show small cap weakness before a large correction, is thus just noise or not?"

But year to date this hasn't been bourne out in the overall UK data - small-caps are doing best so far in 2018:

However, small-cap stocks have peaked before larger cap stocks in the last two bear markets, as shown from the US data:

In 2000:

In 2007:

Do you have any links to the studies you refer to that show small cap weakness preceeding a large correction? Would be much appreciated, thanks.

Fegger

14th Mar '18

I think the price per earnings has become too stretched over the last year and may be swinging back towards more realistic. But agree re the decent results being marked down. Witness Headlam reasonable results and a good long term record was marked down by 20%

john652

15th Mar '18

Hi HM, yes true small caps look ok compared to the other two indicies, but then again those are also experiencing high volatility on individual stocks. 15 years ago a 10% move in a week was unusual for a single stock! I’ve no studies to hand , more just reading over time, although anatomy of a bear, is a nook in my list that I should probably read now.

Rusty2

15th Mar '18

I do think in the last 6 months the market has changed and become more sensitive and more volatile. But I don't entirely agree that all shares have been marked down on results, lets take a few Headlam (LON:HEAD), yes down 20% is harsh but EPS +1% and Rev up 2% is hardly inspiring. Fevertree Drinks (LON:FEVR) inline but shares fell about 6% but next day up 8%. Burford Capital (LON:BUR) good results ahead of forecasts, shares up 30%. Computacenter (LON:CCC) in line but outlook challenging shares down around 8% but now back up to same level. Zotefoams (LON:ZTF) slightly ahead shares up 8%. Somero Enterprises Inc (LON:SOM) about inline shares up 4%. H & T (LON:HAT) excellent int. figs shares up initially but now back down again. Everyman Media (LON:EMAN) good figs but seem to be under forecast, shares up about 7%. So you can it's pretty mixed and quite a few even with inline results the shares have gone up. I think any high flyers that don't meet or beat the forecasts will get clobbered. Small caps are more sensitive to news than larger caps.

letap73

15th Mar '18

Excellent post - Is it possible with Fevertree Drinks (LON:FEVR) and Computacenter (LON:CCC) there was an element of profit taking (thus taking advantage of the more volatile market)?

Rusty2

15th Mar '18

Thanks, I think with Fevertree Drinks (LON:FEVR) it was more the previous history where they have beaten the forecasts by some margin so an inline disappointed some investors, I also sold out, surprised they have shot back up actually. Computacenter (LON:CCC) I have only bought that about 1 month ago so no profit for me, I'm considering selling due to the outlook statement.

AnonymousUser252054

15th Mar '18

I hated doing it but I sold all my shares (bar a small position in an oiler) and closed spread-bets last week. While I had what I thought were medium term holds a combination of factors eventually spooked me; the volatility you mentioned, possibility of a US/China trade war, and EU trade negotiations might turn nasty. To add to my pessimism, having watched Paul's BMUS recently fall back to where it was last July what was stopping even worse happening to my micro portfolio? Stress levels have fallen since.

The flip side of your question is, if the correction arrives, at what point do you buy back in?

Munday

18th Mar '18

I must agree with shine, the sensitivity on the market has increased as of late and I have also sold some of my shares just to be on the safe side,and to top up my cash options.

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Good results = share price falls, bad = a hammering! big correction due?

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John652

9 comments

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