The US Stock Market is ‘Melting Up’

The US Stock Market is ‘Melting Up’

The US Stock Market is ‘Melting Up’

$DIA, $SPY, $QQQ

US stocks rose for a 5th day running, with technology shares bolstering major indexes, as the market’s investors continue to price in the impact of tax cuts before corporate earnings season begins later this week.

  • The S&P 500 Index rose 0.2% to a record 2,747.43 as of 4 p.m. in New York. It rose 2.6% last week.
  • The NAS Comp rose 0.3% to an all-time high, while the DJIA lagged, slipping 14 points from its record to halt its 4-day rally.

The S&P 500 Index’s best week in 13 months propelled it 1/2% of surpassing roughly a 25% of strategists’ price targets for Y 2018.

“It’s only been 5 days but it feels like 40,” head of equity strategy at Wells Fargo & Co. “Overall, it suddenly feels like the consensus is in the reflation trade and almost daily there are more and more converts to the belief in a melt-up.”

Last week’s gainer of 2.8% took the benchmark for American equities to a record 2,743, just shy of the 2,750 mark that where Morgan Stanley’s Mike Wilson, Scotiabank’s Vincent Delisle, and Stifel Nicolaus’s Barry Bannister saw the S&P 500 Index finishing the year.

It outstripped the 2,650 price target of HSBC’s Ben Laidler before the year even began.

Market analysts had been scrambling to bump up their Y 2018 price targets, with both Harvey and Jonathan Golub of Credit Suisse Group AG proffering a more Bullish outlook for US equities in the last 10 days of Y 2017.

But just like Y 2017, when the S&P 500 Index ended more than 175 points above the most optimistic price target heading into the year, the market melt-up may steamroll even the sunniest of views.

High investor sentiment has pushed the S&P 500 Index, as well as most global equity gauges, to overbought levels, but the market’s enthusiasm is grounded in firming fundamentals.

  • The MSCI All-Country World Index added 0.1% for a 5th straight gainer.
  • The MSCI Emerging Market Index gained 0.4% to the highest in nearly years.

The 3 month earnings estimate revision ratio for the US stocks constituents brightened to a 6-year high in December thanks to the passage of the Trump tax overhaul and a rally in Crude Oil prices.

The top-line trends are even more encouraging, as even more analysts have ratcheted up their sales forecasts.

The magnitude of the positive revisions to earnings by companies on the S&P 500 understates the positive impact the Trump tax cuts will have on corporate America, says the Credit Suisse analyist.

“Analysts have adjusted their 2018 forecasts by less than 2 percent for recent tax changes, a fraction of the likely impact,” he wrote in a note to clients Monday.

HeffX-LTN Analysis for DIA: Overall Short Intermediate Long
Very Bullish (0.69) Very Bullish (0.67) Very Bullish (0.73) Very Bullish (0.67)
HeffX-LTN Analysis for SPY: Overall Short Intermediate Long
Very Bullish (0.69) Very Bullish (0.71) Very Bullish (0.77) Very Bullish (0.58)
HeffX-LTN Analysis for QQQ: Overall Short Intermediate Long
Bullish (0.42) Bullish (0.40) Very Bullish (0.54) Bullish (0.33)

Stay tuned…

 

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Paul Ebeling

Paul A. Ebeling, polymath, excels in diverse fields of knowledge. Pattern Recognition Analyst in Equities, Commodities and Foreign Exchange and author of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly regarded, weekly financial market letter, he is also a philosopher, issuing insights on a wide range of subjects to a following of over 250,000 cohorts. An international audience of opinion makers, business leaders, and global organizations recognizes Ebeling as an expert.

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