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Data psychological : The VIX (fear index calculated on the S & P'500 and has an inverse trend compared to the benchmark) closes the week to 11.56 with a slight drop compared to a last week (closing at 11.98). Once again, the 50 day moving average. has feeble attempt to stem the rise in the risk perceived by investors to the market (the rise of fear) caused by the change in the macroeconomic environment with the consequential relocation of portfolios according to the deceleration of the economy. The maximum weekly Vix index was 12.91. For the next week, we expect a slight increase in the Vix volatility index, with a consequential fall in the S & P'500. We Debitower Capital on the S & p'500 we ask to neutral-bearish in a very short period (since we are in an overbought situation) and bullish in the short and medium term. Assume substantial volatility increases only from the second half of 2007 or only for short periods between now and then.
VXN index (the index of fear, calculated on the Nasdaq) closed the week at a height of 17.97 from 17.49, also in this case, the considerations made earlier.
Fundamental Data: The p / e of the prospective average S & P'500 have been updated in the last week.
reiterate what was written in the newsletter of 23 September: "The analysts, in light of the quarterly outputs have lowered the prospects for earnings growth for 2007. In particular, while for the whole of 2006 we expect overall earnings growth of 16.5% for 2007 growth expectations are reduced to a paltry 2.5%. An analysis for each quarter you'll find that the critical period required by the analysis should be the second half of 2007, where the risk of recession suffered a 30-35% chance of occurring, especially in light of the unique configuration of the yield curve and in particular American we refer to the spread that exists between the negative yield to three months and the first decade. Analysts serving a decline in earnings in the second half of 2007 by 3.5%. Mini recession or sharp slowdown, however, surely due to too much growth the previous year, rather than inherent weaknesses in the strongest economy in the world. Despite these predictions over the next three quarters will continue to benefit from strong growth in profits. "
analyze ip / e expected the 2006 and 2007 according to the forecast model Debitower Capital . We are still far from the historical average since 1988 (for more details click here ) the level of balance is increasingly moving towards the historical average from 1935 to today that is much lower because of rising interest rates and instability of economic growth, highlighted by the inversion of the yield curve. Our short-term targets (by end of year), down slightly in 1477 (compared to 1519 study of 23 September and the 1360 study, 12 June), approximately, that is 18.73 p / e calculated on the average prospective results for the quarter 2006 (and today we are at 17.13), every time "at the end of this quarter. For some 'time we introduced another method of valuation which takes into account market expectations and therefore does not rely only on finding the fundamental objective value, but depends on a set of subjective data. The target end of the year 1442 becomes so calculated taking into account the difference in p / e expected between now and the final period (16.05). If we were to strictly follow the assessments of the model p / e could be expected to say that our fork is the 1442-1477 annual target area is quite wide. The market, which is expected to grow from here to end the year between 6% and about 9% (taking into account the substantial increase was in the last two weeks). We expect the upward acceleration budgeted 15 days ago will continue until the first quarter of 2007. In fact, the market may move, in due proportion, as it did between the end of 1999 and 2000 with a sharp rise and then a steep downhill. Our position, however, for now is definitely Bullish is advisable to keep open positions on the market.
analysis COT weekly on the S & P'500 undergoes changes.
In this phase continues the strong dichotomy between the behavior of large traders (large investors) and arbitrageurs (commercial hedgers), while small traders have adjusted upward and, although late, have begun to also open their bullish positions contributing to the strong acceleration of the market. Large investors are buying with both hands, arbitrageurs position themselves as sellers. Two weeks ago we talked about the difference between the behavior of small investors and large investors such as classical representation of temporal asymmetry of information exists on the market.
We said: "The big investors are buying, because they know that the rise in earnings season is not over yet and in any case the trade-offs between stocks and bonds is still favorable to the former, while arbitrageurs close their positions (the 'open interest has fallen drastically.) Small investors could be wrong as usual, but they are bombarded with news that provide disaster given the economic slowdown and rising interest rates, it is nice to know that right now. The raw materials are down, and then provides an economic slowdown worldwide. This is the phrase that most of all turn to investors and that there is substantial agreement. The problem is that you never hear the answer to the question that springs immediately to mind: "When this will have an impact on equity markets and with what effects? The answer lies in the delay that exists between macroeconomic performance, resulting in the behavior of market participants (consumers, business-state)-the dynamics of corporate profits-publication of news or launching of any profit warning. Between the fall of raw materials and the fall osition downward since their target time exceeds six months and provide a drop exceeded the party, given that anticipate the directions of the market for equity markets could spend more than a year without raises some concerns among operators. It 'good to know. "
is new is only the fact that small investors have fallen into the upward trend.
We are bullish in the short and medium term.
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