“An illusion, mmb? But the market is never wrong…”
‘Tisn’t wrong a wit, Squire. The S&P 500’s current level of 3899 is its capitalized-weighting indexing of all 503 constituents as shoved to and fro. But as you regular readers all too well know, the earnings underlying many-a-constituent’s price are, on balance, quite lacking via to the historical norm, with yields relatively unattractive versus those from the debt market.
Further, with Q2 Earnings Season now kicking into gear, it shan’t be pretty. For example, next week we count 11 entities of the banking industry to report for Q2: only three by consensus are “estimated” have bettered earnings over Q2 of a year ago.
“But mmb, that’s already priced in…”
Squire, we’re nowhere yet near “priced in”. The Econ Baro continues to plummet, Fed-Atlanta (nearly a year behind) sees confirmation of recession come 28 July, five-year dough yields double that of the S&P, and should earnings not grow and the “live” S&P’s price/earning ratio (30.8x) again revert to its historical mean (22.3x) that places the Index at 2823, (should you be scoring at home). First however, let’s deal with the oft-noted S&P 3600-3200 “critical support zone” coming to a quotation screen near you.
Yet, ’tis not all bad: for May, growth in Factory Orders picked up, Wholesale Inventories worked down, and the Trade Deficit was reduced, (how’s that “Dollar strength” workin’ out for ya?) But the month’s Consumer Credit was sharply lower, growth in June’s Hourly Earnings slowed (how’s that “inflation” workin’ out for ya?), Average Workweek hours were reduced, and as to the aforementioned “strong” Payrolls data, they actually were a bit less than May’s net creation, which itself was revised lower from April, (but we’re not supposed to cite that).
Notwithstanding, we next cite Gold’s poor price presentation via our two-panel graphic of the last three months by the day on the left and 10-day Market Profile on the right. Butt-ugly by both boxes:
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