The collision of global markets and social mood

Thursday, December 8, 2016

Thursday -- ECB Taper, The Rally & The Valuations

S&P E-mini Futures:
Bouncing around the flat line.

The ECB announced it will taper its asset purchases from €80 billion to €60 billion per month in April 2017 and will continue until the end of 2017, "or beyond, if necessary."

Yields higher throughout much of the world amid green equities, ex-China.

As noted back in September, Goldman Sachs recently repeated, as of November 28th:

"S&P 500 valuation is stretched relative to history on nearly every fundamental metric. At the aggregate level, the S&P 500 index trades at the 85th percentile of historical valuation relative to the past 40 years. For portfolio managers, the more important fact is that the median S&P 500 company trades at the 98th percentile of historical valuation."

Median stock historical valuations:

P/E to growth 100%
EV/Sales 100%
Price/Book 98%
Forward P/E 94%

Yesterday's rally stretched even further into Daedalus and Icarus territory.

EUR still digesting ECB decision. Spiked higher then weaker. USD firming on the news.

Prices lower once again. Bearish engulfing candles on daily charts.

WTI crude had a wild, choppy ride yesterday. Wave structure still unclear but tilting toward not being impulsive down, hence higher prices possible at some point.

Also, NG's three-wave decline from recent rally highs opens door to higher highs at some point as well.

Precious metals down post-ECB. Copper higher.

S&P Outlook:
What a day yesterday. An impressive rally by any standard, and another great example why markets need to be respected both up and down.

To echo yesterday's comments here regarding Trump Time magazine Person Of The Year cover, the rally was "probably about as good as it's gonna get right now for social mood and the markets."

Price extended so far that it would have to come all the way back to below 2209.42 to break the impulse structure.

Loved this comment from Ayako Sera, a strategist at Sumitomo Mitsui, who told Bloomberg that globally, “we’re seeing a euphoric state continue, and investors will also be heading into the Christmas break soon, so we’re seeing some final moves to get into the market or close off positions.”

A weird heads up was the fact that while the S&P was up over 1% Thursday, VIX was up 3.65%.

VIX hugging the lower Bollinger band is not an equity buy signal.

No comments:

Post a Comment