Beware of Divergences!

Something has to give. With three weeks to go before quarter end, we may be at risk of a more difficult earnings confession season. These two measures can only diverge for so long.

Recent market behavior would suggest that analysts may be clinging to overly optimisitc expectations. Weakness in energy, metals, semiconductors, machinery, and economically sensitive Aussi and Cdn dollars is telegraphing a belief that risks are rising. Complacency is the enemy of investment success. We have to understand the message that the market is sending and pay attention.

When consensus says one thing and the market says the other, the market generally gets it right.