What that S&P 500 Chart Looks Like Now

What that S&P 500 Chart Looks Like Now

What that S&P 500 Chart Looks Like Now

$SPY

The Big Q: When we look a candlestick chart of the S&P 500 what does it show us?

The Big A: The benchmark index has been up and down but in an upward trend YTD.

If you are a Bear, you see a major market Top.

If you are a Bull, you see a consolidation of the huge move off of President Trump’s election that is forming a base for the S&P 500 to run to new record highs.

Shayne and I are Bulls.

The S&P 500 has been climbing a wall of worry since it bottomed on 8 February at 2581. It retested that low on 2 April.

Since then, it + 7.2% through Wednesday’s close.

Helping the market to climb the wall of worry are expectations that the Q-2 Y 2018 earnings season, which unofficially begins Friday, and from the PEP preview Monday, it should be a big hit.

There is no disputing that President Trump’s tax cuts at the end of last year are Making Earnings Great Again this year.

Consider the following date:

  1. Q2 consensus estimates. As of the 7/5 week, industry analysts were expecting that Q-2 earnings for the S&P 500/400/600 jumped 20.3%, 17.0%, and 32.0% Y-Y. Growth rates are expected to remain high during the last two quarters of the year as a result of the tax cuts at the end of last year. And industry analysts are expecting the following Q-2 earnings growth rates for the 11 sectors of the S&P 500 from highest to lowest: Energy (141.2%), Materials (33.6), Tech (25.5), Financials (22.0), S&P 500 (20.7), Consumer Discretionary (16.4), Industrials (15.1), Health Care (11.1), Consumer Staples (9.6), Telecom (8.1), Real Estate (2.2), and Utilities (1.2).
  2. Forward revenues and earnings. The strength in earnings growth is mostly attributable to the tax cut at the end of last year. But, no matter all the talk about a global economic slowdown and the dangers of trade protectionism, the forward revenues of the S&P 500/400/600 continued to rise in record-high territory during the 6/28 week. The same can be said of S&P 500/400/600 forward earnings.
  3. Ys 2018 and 2019 consensus estimates. Their S&P 500 revenues estimates for both Ys 2018 and 2019 have been making new highs nearly every week since this year began. They are currently expecting revenues to increase 7.9% this year and 5.1% next year.

Analysts’ S&P 500 earnings estimates for this year and next jumped dramatically in the weeks immediately after the tax cut, and have continued to inch higher. Industry analysts are expecting earnings to grow 22.3% in Y 2018 and 9.9% in Y 2019.

Added to that the Fed is being very cooperative.

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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