Trend outlook 2018

YTD NASDAQ

For the first time since almost 30 years – the entire world is seeing +positive grown for 12 months!

Of the top ten largest corporations in the world in 2009, only one was a technology company – Microsoft.  Today, seven of the ten largest companies worldwide are technology companies including Apple, Google/Alphabet, Microsoft, Facebook, Amazon, Alibaba and Tencent.  The shift to a technology dominated economy provides a boost to earnings growth rates.

Over a fifth of the S&P 500 is represented by the technology sector.  Consensus revenue growth for the technology sector in 2018 is 9.4% which should drive 35% earnings growth.  In the past month, the revenue growth forecast was revised up from 8.7% to the current 9.4%.

The earnings per share for the MSCI AC World Index (ACWI) is above $30.  In the U.S., the S&P 500 consensus earnings estimate is expected to advance by about 11% year-over-year on revenue growth of about 5% off of record levels reached in 2017.

If the P/E remains constant as it has for the past two years, the S&P 500 should be up in-line with earnings or about 11%.

Source : Delta market sentiment

those pesky charts!

QLD WEEKLY WEEK OF 10 25 2017

above is a weekly close for QLD.

QLD which is 2X Nasdaq 100 appears to have hit a plateau 2 weeks in a row 10/16 and then last few days.

last 4 trading sessions NASDAQ hit 3 distribution days – which is concerning.

On 5/29 week QLD closed 62.65, where as the MA 20 Weeks was 53.67 – 8.98 dollars difference! about 14 %.  Then it dropped by 6.3 dollars (around 10%)

The situtation is not that bad now – the difference between the two (MA and the price ) is about 4 %

Now for the current scenario – the ATR 20 DAYS is 2.43.

So lets wait and see. No clear sell as yet

very interesting note on Market health

Nasdaq, S&P 500 Make It Seven In A Row; Netflix Jumps On UBS Note

IBD has this – “When it comes to overall market health, what’s interesting to note is that the market has moved from a high distribution-day count in the S&P 500 and Nasdaq and overall healthy action in leading growth stocks to a low distribution-day count and suspect action in some leading growth stocks. Many leaders are still acting fine, while others have turned sluggish.”

USA is doing great!

usa

For 38 weeks in a row – straight weeks, Since Donald Trump was elected the 45th U.S. President the market has been in a bullish trend. That is it has been around 269 days of relentless bull (a very, very mature bull market though).

Many people got left out, because they predicted the market collapse. The market is a leading indicator of the overall health of the economy of the USA

S@P gained around 18%

DOW gained around 21%

NASDAQ gained around 23%

41 times DOW hit new highs!! 41 times!

Monday August 21, 2017 is a coast to caost solar eclipse and some people as usual are predicting dire straits for USA. They may or may not be right. But as of today USA is doing great!!

But for the naysayers

Here is good news too

Electronics for Imaging – EFII, collapsed 41% in thousands of times more volume than average. This might be a time to time to buy Put Options. Remember Enron accounting irregularities! – Thursday was quarterly results and they failed to release it , citing issues over revenue recognition!!

Applied Optoelectronics – AAOI, plummeted 27%. The maker of optical-communications devices forecast current-quarter revenue that was well below estimates. Before Friday’s drop, Applied had best-possible IBD ratings. Its fiber optics industry group was ranked No. 1 of 197.

Trivago- TRVG, collapsed 18% to a three-month low after the travel-booking company reported loss in the quarter.

Impinj- PI, skidded 23% in more than seven times its usual volume. The tracking-chip company beat Q2 sales and earnings views, but gave a soft outlook.

First day of August – market feels tame

Weekly chart on the right appears to be forming a top. but it is clearly in an uptrend

daily chart (on the left) – good chart damage a few days ago in higher volume

Major Indexes rose only 0.2 % – 0.3 %. Small caps ran up – Russel went up 0.2%

On NASDAQ – volume – a good indicator of institutional buying is roughly even compared to Monday.

The best Industry group today is automation industry – up 4.1% – supported by CGNX  – up 11%

Consumer loan, oil field services, scientific and measuring gear, heavy construction and outsourcing companies also outperformed well and grew more than 2% today.

 

A view to a kill!

COMP SHOT JULY 24TH 2017

what’s more at the top? More of the top.

Last week all the indices hit all time high.  How far is far enough?

when P/E is constant, then the risk premium is constant.

P/E has been hovering for S&P Index around 20.5 for the last and half year (DEC 2015 to June 2017) .   earning increased from 100 dollars to 116 dollars around 16%

So mostly the gain in S&P came from the gain in real earnings of the companies!

So assuming just the earning to grow by 10% (very reasonable..just the growth %) and P/E = 20.5 as constant

then S&P would be (116+10% of 116)  * 20.5= 2615 – a gain of 144 points from today.

the leading economic indicators – % change has been positive for the last 10 months!

around 65 % of stock market is about its 75 days moving average.

Now value of companies according to the theory is based on discounted value of the cash flow. because of low interest rates companies can borrow much with little interest paid. Hence expansion, hence earnings growth!

Happy trading!

“The market can stay irrational longer than you can stay solvent.” –  John Maynard Keynes