* David Kostin, Goldman Sachs' chief U.S. equity strategist, expects stocks to have another healthy year in 2013.
"We forecast S&P 500 will reach 1575 at year-end 2013 based on our new 2014 EPS estimate of $114 and a fair value P/E of 13.9X," he wrote in a note to clients
** I Know First algorithmic system**
also supports this stance on the markets in 2013.
Bearish correction - a near term thing
The index has gained 6.2% in 2013 alone after around 75% of the firms in the S&P 500 have beaten analyst expectations. There is even more good news for those long SPXU and SPY as the index is trading at 15 times earnings; this is below the 60-year average value of 16.4.
Federal Reserve Chairman Ben S. Bernanke defended the central bank’s unprecedented asset purchases, saying they are supporting the expansion with little risk of inflation or asset-price bubbles.
“We do not see the potential costs of the increased risk- taking in some financial markets as outweighing the benefits of promoting a stronger economic recovery,” Bernanke said today in testimony to the Senate Banking Committee in Washington. “Inflation is currently subdued, and inflation expectations appear well anchored.”
Time to sell?
If the 200-day moving average is the best we can do in our search for our top-identifying indicators, the rational thing to do would probably be to give up and resign ourselves to buying and holding
This was a good week, both for data and for earnings:
** Retail sales were pretty good (see Steven Hansen at GEI for the full story).
** Housing inventory is down 16%, y-o-y. And yet another survey shows prices higher. (Both via Calculated Risk).
** Weekly jobless claims dropped to 341K, well below expectations.
** Michigan sentiment posted a solid rebound.
However, my data suggest, on average, SPY continues to increase another 1.78% after breaking though the high band. Im holding sticking it out for now.
Amazingly, the support line at 1507 appears to be creditable and reliable, as it bounced off of it yesterday, Friday, and earlier on the seventh.
At the start of the year, the consensus Wall Street year-end price target for the S&P 500 was 1,531, which translates into a gain of 8.76%. With the index up 6.65% year to date, the market is already close to the consensus price target after just a month and a half.
A strong January forced short-sellers to cover their bets in several prominent ETFs, with both SPY and IWM seeing an 11% reduction in the percentage of their float shorted.
The MSCI EAFE Index Fund (EFA) - with heavy exposure to Europe - saw a 24% reduction in shorts. Seeing an increase in activity is the SPDR Retail ETF (XRT) - 259% of the fund's float is now being shorted.
Markets are not overvalued:
1) DOW/XAU Today's number of 7.97 is close to the 60 year minimum
2) It is hard to argue with the statistics.
Since all indicators show that we will have a positive 2013 year for the S&P500
With the S&P 500 up for six straight weeks and counting, there is a genuine skittishness on the part of investors that the market has gotten ahead of itself and is due for a pullback. Two examples of the increased wariness of the market are the weekly Bespoke Market Poll, which has shown more bears than bulls for three straight weeks now, and the weekly bullish sentiment survey from the American Association of Individual Investors, which has declined for two straight weeks.
Only time will tell if investors will be proven right, as the S&P 500 is certainly overbought.
Related to the Gold price, S&P is a bargain
In 2012, S&P 500 was actually up more YTD (7.39%) than it is this year (6.53%). Last year, it wasn't until the S&P 500 was up more than 12% on the year before the index saw its first meaningful pullback.