Market is looking more bullish
The S&P 500 continues to hold above the key support level I have been highlighting recently (~2800). We are also seeing more positive developments in the Healthcare and Consumer Staples sectors, both of which are looking more bullish.
Drought of new highs
However, the S&P 500 has now gone 130 trading days without making a new high. This is the third-longest stretch without a new high since the bull market began in 2009. If the current stretch continues until 10th August, it will become the second-longest stretch.
This point is causing some nervousness. Has the market stalled here? is “THE TOP” in place? In my view, the evidence points to the path of resistance remaining higher. I expect we will see higher highs in the future.
Earnings continue to beat at an impressive pace, with the “beat rate” tracking at 69.7%.
Recession is not imminent
Urban Camel highlighted that with the GDP growth rate trending up, the next recession is unlikely until 2Q2019 at the earliest:
In fact, Urban Camel has written this excellent blog post explaining why recession risk remains low, which goes against the current of consensus thinking right now, with many people panicking about the prospect of an inverting yield curve.
Equity valuations back to their 25 year average
Here’s an interesting statistic from that post that you may not have been expecting:
“With the rise in earnings and the moderation in share prices, valuations are now back to their 25 year average. The consensus expects earnings to grow about 18% in 2018 and 10% in 2019. Equity appreciation can therefore be driven by both corporate growth as well as valuation expansion.“
I have recorded a video that you can access below. I analyse current market action and levels and also take you through some a my current favourite stock positions and trading opportunities.