Home 2020 Looking for this Rally to Continue Into the Fall

Looking for this Rally to Continue Into the Fall



No matter what you here, this market is not overvalued and barring any unexpected bad non-economic news, will continue to head due North.

The current P/E ratio for the S&P 500 is 22ish.

That is in line with the 12-month forward P/E ratio based on analysts’ expected EPS.

The 25-yr MA is 25 and with the secular decline in interest rates, the sustainable P/E ratio is likely to continue to move up and above 25.

Simply the inverse of the P/E ratio shows us how stocks compete with long-term bonds and at about 4.5%, it is about 3X the yield on long-term bonds.

That is more than adequate reward compensation for the risk.

Current stock prices should be sustained by the expected pace of economic recovery and should go higher through the Summer and into the Fall as the economy continues to recover from the Medical Malpractice chaos.

The market is reflecting optimism that some solution can be reached regarding the C-19 coronavirus vaccine, treatment or a combination of effective testing to fully open the economy.

Investors are optimistic that there will not be an uncontrolled 2nd wave that forces another lockdown.

Thursday, the major US stock market indexes finished flat to unchanged at: DJIA +11.93 at 26281.82, NAS Comp -67.10 to 9615.84, S&P 500 -10.52 to 3112.22

The Bull paused to refresh Thursday, as the S&P 500 declined 0.3% in a flat session snapping a 4-session winning streak. The DJIA posted a 0.1% gainer, the NAS Comp declined 0.7%, and the Russell 2000 closed flat. 

As I write this report the S&P 500 futures are +14.75 at 3,125.35.

Volume: Trade on the NYSE came in at 1.2-B/shares exchanged

  • NAS Comp +7.2% YTD
  • S&P 500 -3.7% YTD
  • DJIA -7.9% YTD
  • Russell 2000 -13.0% YTD

HeffX-LTN’s overall technical outlook for the major US stock market indexes is Very Bullish in here

Looking Ahead: Investors will receive the Employment Situation Report for May (NFPs) and Consumer Credit for April Friday. 

Have a healthy weekend, Keep the Faith!

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Paul A. Ebeling, a polymath, excels, in diverse fields of knowledge Including Pattern Recognition Analysis in Equities, Commodities and Foreign Exchange, and he is the author of "The Red Roadmaster's Technical Report on the US Major Market Indices, a highly regarded, weekly financial market commentary. He is a philosopher, issuing insights on a wide range of subjects to over a million cohorts. An international audience of opinion makers, business leaders, and global organizations recognize Ebeling as an expert.