Hello,
For those that have asked for weekly barometer readings the scoop follows. This past week Old_Skeet's market barometer closed the week ending of April 28th with a reading of 145 which is down form the previous weeks reading of 147. The four week rolling average computes to a reading of 146. The fair value reading on the barometer ranges from a low of 145 to a high of 155. With this, all of the above noted barometer readings indicate that the S&P 500 Index is currently in fair value range.
The barometer has three feeds: 1) an earnings feed, 2) a breath feed, and (3) a technical strength feed. The three feeds are scored resulting in the barometer reading. The barometer then feeds my equity weighting matrix which I use as a guide to assist me in setting my portfolio's equity allocation weighting. Currently, the matrix is sugesting an equity weighting for the portfolio at 48% to 49% with a 50% weighting being a neutral position for my portfolio. At this time the difference is not enough for me to even begin to think of tinkering with my equity allocation.
Please remember, a lower barometer reading indicates that there is less investment value in the S&P 500 Index over a higher barometer reading. With this, the barometer indicates for the past four week period, on average, the 500 Index was about 3% overvalued: but, within the fair value scale on the barometer. However, with the 3% over valuation factor the Index is considered extended.
These findings are somewhat in concert with Morningstar's Market Valuation Graph which I have linked below.
http://www.morningstar.com/market-valuation/market-fair-value-graph.aspxI am still with my forecast that the S&P 500 Index will reach 2475 sometime during 2017. Currently, it still has a climb of 91 more points or another 3.8% to go from Friday's (April 28th) close of 2384 to reach this target. The Index started the year with a reading of 2239 and with a barometer reading of 147. Thus far this year the barometer has had a low weekly reading of 131 to a high weekly reading of 150.
What does all of this mean? To me, most likely it means that a good number of investors are willing to pay-up for anticipated forward earnings estimates. Reduce the strong earnings feed input reading and the barometer moves to an overvalued reading. The other question now raised. Will investors over pay for these anticapted earnings? After all, they are only estimates and these estimates usually get revised downward just before companies report earnings and revenue. The real earnings numbers come from reported earnings and they are currently some distance behind estimtes with reported earnings for the S&P 500 Index coming in at $99.70 through March 31st. I'm thinking forward estimates will be revised downward and not come in as first projected. For me, a $145.00+ forward earnings estimate, by some, is a pretty strong 2018 earnings forecast. I'm not the only one with this thought.
Take a look ...
Eddy Elfenbein of Crossing Wall Street thinks earnings estimates for 2018 are set to high and will get revised "downward."
http://www.crossingwallstreet.com/archives/2017/02/2018-earnings-estimate-147-98.htmlThanks for stopping by and reading.
Have a good weekend ... and, most of all ... I wish all Good Investing."
Old_Skeet
Comments
http://stockcharts.com/h-sc/ui?s=SPY&p=W&yr=3&mn=0&dy=0&id=p86994408385
Ya! I also viewed with 6 months (just before election) and for 1 year.
I wish I had more time for the "whole school"; including all of the individuals who have worked with the various methods.
Thank you.
Catch
Thanks for making comment.
If you would like to see the number of stocks (by percent) above their 200 day line then use this symbol $SPXA200R along with the Elder Impluse plot system set weekly. Notice for the month of April the number (by percent) has been in good decline as the graph apprears mostly in red for the period along with the slow stoch also in decline. I usually look at things from a rolling one year perspective. With the decline in the number of stocks above their 200 line thus far in April ... Well, I'm thinking with summer coming stocks are indeed headed soft and this somewhat supports this thinking.
Again, the barometer consist of more than following price movement alone as the technical strength data feed consist of both RSI & MFI. True, part of the data comes from price action (RSI) but there is another component as well (MFI).
And, don't forget the earnings feed consisting of present and future estimates (looking back and forward) is the focus here.
And, lastly ... The barometer is a meausring tool for it is designed to measure the value of the 500 Index at a given period of time. A lower barometer reading indicates there is less investment value in the Index while a higher reading indicates more value. I ususally buy during periods of high barometer readings and trim during periods of low readings.
During the month of April the trend has been a rising barometer reading ... but, it has yet to reach my buy zone. The April weekly readings follow: 142, 150, 147 & 145 for an average of 146. March readings were 135, 144, 140, 146 & 141 for an average of 141. With this, it seems from review of the data more investment value is now present in the Index over that of March while February's numbers averaged even less than March's at 140.
It will be interesting to see what May brings.
Again, thanks for making comment.
My best to the both of you.
Skeet