Hey what’s happening? I hope you are well
It’s time for some earnings insights and you know, I’ve broken my own rule. This first thing is so important everyone needs to see it.
Clearly it’s a bifurcated market, a bifurcated economy out here and I think engine maker Cummins CMI is a perfect example of this, all in one company.
They noted sales were slightly down but net income was +25% because you guessed it - AI (power systems)
They noted heavy and medium duty truck sales were -30%. In fact
If you look at the orders in the past 3 or 4 months, they're amongst the weakest 3 or 4 month periods we've had in the last 20 years
Of course one big driver stalling out sales in everything auto (outside of tariff chaos) - is there are big emissions regulations expected to come on in 2027 - but c’mon you think Trump is going to let that happen?
The other complexity that we're dealing with is a lack of clarity on emissions regulations means we've got to retain flexibility on the engineering side
So while there still are plenty of reasons to be optimistic about at least pockets of the market and economy, we can all see it’s a very uneven environment.
In fact, the Grandaddy of them all of smoothed breadth readings has reached a critical juncture. This chart is the 200 day moving average of new highs - new lows in the New York Stock Exchange
The idea is to track crosses above and below 0 as big picture breadth environment tells. The market has been on a buy signal for over a year and a half now, but has quickly found 0 here. There are no perfect indicators, but you can see in 2008, 2015, 2018, right in the middle of covid, and early 2022 sell signals flashed before further selling took place.
So it’s an important juncture and one we’ll be keeping an eye on in the coming days and week.
One Big Theme
One investable theme has emerged throughout earnings season