New DCNewsletter analyze the market in the three angles (psychological, fundamental and quantitative) data
psychological : The VIX index (the index fear calculated on the S & P'500 and has a reverse trend compared to the benchmark) closed the week at 10.63 with a slight drop compared to a week ago (closing 10.88). A far cry from the 50 day moving average. very close to historical lows and the perceived risk by investors in the market (the rise of fear). The euphoria of recent weeks could lead to of profit taking. The maximum weekly Vix index was 12.03. For the next week, we expect an 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 the short term (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 16.70 from 17.87, also in this case, the considerations made earlier.
Fundamental Data : The P / E average of the prospective S & P'500 have been updated in the last week.
reiterate what was written in newsletter 8 October: "The analysts, in light of quarterly releases have lowered the prospects for earnings growth for 2007. In particular, while for the whole of 2006 we expect overall growth of profits 16.5% for 2007 growth expectations are reduced to a paltry 2.5%. By analyzing for each quarter, we realize that the critical period provided for in 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 Americans in particular we refer to the spread that exists between negative performance in 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 gains in ".
analyze ip / e expected in 2006 and 2007 according to the model forecast Debitower Capital. We are still far from the historical average since 1988 (click here for details
) 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, as evidenced by the inversion of the yield curve. Our short-term targets (by end of year), down slightly in 1478 (compared to 1519 study of 23 September 1477 and the study of 'October 8), approximately, that is 18.73 p / e average prospective calculated on the results of the second quarter of 2006 (and today we are at 17.29), every time post 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 1475 becomes so calculated taking into account the difference in p / e expected between now and the final period (15.98). If we were to strictly follow the assessments of the model p / e could be expected to say that our fork is the 1475-1478 annual target area is quite wide.
The market, which is expected to grow from here to end the year between
'8% and 8, about 2% (taking 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 very bullish and we recommend to keep open positions on the market. analysis COT weekly on the S & P'500 undergoes changes. In this phase, the bull market is driven by the behavior of large traders (large investors), while small traders were tentatively adjusted upward and arbitrageurs (commercial hedgers) are strongly positioned downward. The situation sets a strong overbought by large investors, who must, of necessity, take advantage. The position of arbitrageurs indicates that there is a strong expectation of a fall from here to six months. In our view, taking into consideration a wider time perspective, the market is waiting for small investors to enter into mass and then reverse. Here is what we said a month ago at this time.
We said: "
Large investors are buying, because they know that the season rise in profits is not over yet and in any case the trade-offs between stocks and bonds is still favorable to the former, while arbitrageurs or close their positions (open interest has dropped drastically) or are positioned downward since their target time exceeds six months and provide a drop exceeded the party, given that anticipate the directions of market imperfections and analyze the deviations. 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 falling, and then provides an economic slowdown worldwide. This is the phrase that turns over all among 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 in stock markets could rise even more than a year without any cause for concern among operators. It 'good to know. " We are bullish in the short and medium term.
