Tag: S&P 500

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S&P 500 breakout

Short candles on the S&P 500 indicate some opposition, but breakout above resistance at 1675 indicates an advance to 1800*. Follow-through above 1700 would strengthen the signal. The 21-day Twiggs Money Flow trough above zero indicates medium-term buying pressure — and a healthy up-trend. Reversal below 1650 is unlikely, but would warn of another test of primary support at 1560.

S&P 500 Index

* Target calculation: 1680 + ( 1680 – 1560 ) = 1800

The VIX below 15 suggests low market risk.

VIX Index

The TSX Composite Index is advancing towards resistance at 12900. Breakout would signal a primary advance, with a long-term target of 14000*. Follow-through above 13000 would strengthen the signal. Breach of the declining trendline on 13-week Twiggs Money Flow would also suggest improving buying pressure. Respect of 12900, however, and reversal of 13-week TMF below zero, would warn of another test of 11750.

TSX Composite Index

* Target calculation: 13000 + ( 13000 – 12000 ) = 14000

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S&P 500 hesitates but ASX 200 follows through

The S&P 500 is testing resistance at 1650. A 21-day Twiggs Money Flow trough above the zero line would signal a healthy primary up-trend. Target for the advance would be 1800*. Follow-through above 1660 would strengthen the bull signal, but reversal below 1640 would warn of another test of 1600 — and a possible inverted head and shoulders pattern (as shown by the arrows) if support at 1600 is respected.

S&P 500 Index

* Target calculation: 1680 + ( 1680 – 1560 ) = 1800

The ASX 200 found resistance at 4900, with a tall shadow (or wick) on Wednesday’s candle. A healthy start this morning suggests a test of 5000. Breakout would offer a long-term target of 5850*. Reversal below 4860 remains unlikely, but would warn of another test of support at 4650.

ASX 200 Index

* Target calculation: 5250 + ( 5250 – 4650 ) = 5850

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Dramatic fall on S&P 500 – April 16th

Apologies. I deleted this April 16th post by accident.

The S&P 500 fell 220 basis points (2.2%) on Monday, blamed variously on disappointing growth figures from China, the fall in gold, and the Boston Marathon tragedy. I still suspect that the primary cause is the tectonic shift last week by the Bank of Japan.

“Where is the fall?” you may ask, when viewing the chart below. That is what I enjoy about monthly charts: they place daily moves in perspective. Breach of support at 1540 would indicate a small secondary correction, while breakout below 1490 would signal a correction back to the primary trendline. But the primary trend remains up. Only a fall through 1350 would suggest a reversal.

S&P 500 Index

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2013 Profit Margin Expectations | Business Insider

Sam Ro writes:

Overall, Wall Street’s strategists are bullish on stocks for 2013 for various reasons.

One reason worth taking a second look at is expanding corporate profit margins, which are already at historic highs.

A slew of experts like GMO’s Jeremy Grantham, SocGen’s Albert Edwards, LPL Financial’s Jeff Kleintop, and John Hussman think these margins are unsustainable.

But the equity analysts and the companies they cover disagree……..

That is the medium-term outlook, but one has to question whether low effective tax rates and low interest rates are sustainable in the long-term. A weaker dollar has also boosted the conversion of offshore earnings but that is a one-off gain unless the dollar continues to weaken.

Read more at 2013 Profit Margin Expectations – Business Insider.

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The impact of QE3

Expect stocks and commodities to rally – especially gold.

The S&P 500 followed through above 1440, confirming the primary advance to 1560*.

Index

* Target calculation: 1420 + ( 1420 – 1280 ) = 1560

Spot gold broke through short-term resistance at 175, headed for a test of $1800/ounce*.

Index

* Target calculation: 1650 + ( 1650 – 1500 ) = 1800

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BOB JANJUAH: Time For Action, Warning Over – Business Insider

Sam Ro of Business Insider reports on Nomura strategist Bob Janjuah’s August 21 note:

“I now think the correct thing to do – as I also said in April and June – is to prepare for a serious risk-off phase between August and November,” [Janjuah] reiterated. “Over the August to November period I am looking for the S&P500 to trade off down from around 1400…by 20% to 25%…to trade at or below the lows of 2011.”

He argues that the key drivers of this sell-off will be disappointment at next week’s Federal Reserve Jackson Hole speech and realization that the ECB won’t be be able to deliver on their promises.

via BOB JANJUAH: Time For Action, Warning Over – Business Insider.

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Corporate Profit Streak Faces a Threat – WSJ.com

KATE LINEBAUGH: In the third quarter, earnings by companies in the S&P 500 are expected to shrink for the first time since just after the recession ended, according to Thomson Reuters, which surveys Wall Street analysts…..declining by about 0.4% from the year-earlier quarter…..That follows what will likely have been three straight quarters of decelerating profit growth.

via Corporate Profit Streak Faces a Threat – WSJ.com.

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S&P 500 dividend yields signal oversold?

Historically the S&P 500 was considered overbought — and ripe for a bear market — when the dividend yield dropped below 3 percent. A surge in share buybacks in the past two decades, however, disrupted this relationship, with the dividend yield falling close to 1.0 percent in the Dotcom era.

S&P 500 Earnings and Dividend Yields

What happens when we adjust for share buybacks?

In 2011, S&P 500 share buybacks increased to $409.0 billion. With dividends of $298 billion*, that gives a total cash distribution (dividends and buybacks) of $707 billion for a yield of 5.44 percent. Right in the middle of the 5.0 to 6.0 percent range previously considered typical of an oversold market.

* S&P 500 market capitalization of $12,993 billion at June 29, 2012 multiplied by 2.29 percent

Unfortunately share buybacks fluctuate wildly with the state of the market:

S&P 500 Share Buybacks

If we omit the highest and lowest readings, and take the average share buyback over the remaining 3 years, it amounts to $349 billion. That would give adjusted total cash distributions of $614 billion and an adjusted yield of 4.98 percent — still close to the oversold range.

Compare to Earnings Yield

The current reported earnings yield of 6.8 percent, however, is way below the highs (10 to 14 percent) of the 1970s and 80s. Current distributions (dividends plus buybacks) amount to 80 percent of current earnings. Payout ratios above 60 percent are considered unsustainable.

My conclusion is that earnings yield offers a more accurate measure of value. And reflects a market that is fairly valued — rather than overbought or oversold — especially when we consider the likelihood of earnings disappointments.

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S&P 500 engulfing candle

Monday’s engulfing candle [R] on the S&P 500 warns of reversal to re-test support at 1270. Respect of the zero line (from below) by 21-day Twiggs Money Flow would indicate strong medium-term selling pressure. Failure of support would offer a target of 1200*.

S&P 500 Index

* Target calculation: 1270 – ( 1340 – 1270 ) = 1200

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