Earnings Pre-Announcements going the wrong way in the wrong group

Today NSC, Norfolk Southern, trains I grew up smashing pennies on their tracks, occasionally doing other stupid teenager things, pre-announced and cut their earnings estimate. You may recall just this week we looked at the large divergence between transports and the Dow-30, it's larger now then at any other time in the last several years. This of course doesn't bode well for manufacturing whatsoever, especially the depth of the pre-announcement.

NSC said to look for Q3 earnings per share (EPS) in the range of $1.18-$1.25 vs consensus of $1.63, that's a big pre-announced miss for Q3! The fact its in transports too makes it all the worse as that's the end of the road for manufacturing so to speak.

 In a perfect example of not getting lost in the lines and when in doubt, go to the longer charts, NSC insiders and/or those on Wall Street were either very sharp with their analysis or someone got a tip off early, a big tip off.

PCLN offered 1 example of sticking with the longer term charts and just being patient

Overnight from this set of negative divergences-as typical the first a relative negative followed by a sharper leading negative divergence led to an overnight gain of 17+% for our short and put the core short at a 26.5% gain.

If you think that signal was half way decent, just look at NSC's

 In After Hours after a daily close of -1.66%, the after hours lows hit $68.00 and closed AH at $69.07, down from $72.70 at 4 pm.

 While these negative divergences on these longer timeframes aren't as time specific and we certainly don't know that there will be an earnings related event or something else, we just know that smart money seems to be headed for the exits pretty fast and they must have a pretty good reason for doing such. The 30 min chart shows good confirmation otherwise until this last ramp, the divergence is leading negative on a 30 min chart, the worst kind of divergence on a long term important chart timeframe.

The 60 min chart looks similar.

This is one of the reasons I want to establish as quickly and as credibly as possible, whether QE3 caused a reset or whether it was priced in (and it could have been priced in for bearish purposes as well), if it was the later, then we still have some very ugly longer term charts in many, many assets.

For now we now a few things, the earnings "pre-announcement season" which we have seen nearly all year has started in which companies lower expectations before earnings and still the majority miss; we also know that transports are feeling the pinch and if we follow the bread crumbs this leads right back to consumers and manufacturing, which raises more concerns about the economy and inflation going forward now that Bernie has all but spilled his guts, shown the market all of his cards and taken away the surprise effect that the market benefitted from so dramatically according to one of the F_E_D's own reports.