I hope all had a good weekend. I apologize but we had a big electrical lightening storm here which wiped out the power for around 12 hours earlier today hence the delay in posting these new reports.
Here below the weekly equity report from JPM. Its an excellent report. The sectoral analysis is on the money. They are forecasting a strong end of year and raising their targets for the S&P500.
Their specific stock recommendations ill leave to the team.
One of their top picks is US Airways Group trading on a forward pe of 6.8. Recent fundamental analysis hereon the stock.
http://seekingalpha.com/article/1767112-us-airways-how-high-will-it-fly
What do we see, once again, its weak fundamentals vs the strong price technicals which indicate the likely YE “santa” extension to her strong 2yr 500% bull trend for US Airways and the wider indexes.
All sorts of parallels to the wider market can be drawn here, in terms of the divergence between the fundamentals and the price technicals as we have seen this for some time now. But as the perma bears have discovered to their cost positive price technicals can win over the disappointing earnings, higher taxes and weak markets breath issues for extended periods of time. As we have strong positive seasonals here its likely the positive price technical picture will sustain into year end as JP forecast.
On sentiment they are correct that the AAII survey has seen a big shift this week which is no longer showing an over bullish sentiment reading. Its back within the realm of normality and therefore this provides a positive tail wind into year end. Other sentiment work like the put call ratio hasn’t confirmed this AAII shift in sentiment but its one less red flag on the market which is positive development for the YE bulls.
On the market sectoral issues it remains strong stuff, especially in the euro zone. If you run a chart set across the euro sectors its hard to find fault with the euro price action across most of the sectors.
US wise, Finance has broken out with Banking with in this sector very close to a new price breakout which would be very supportive of an extension. Semi conductors the same. US health care remains on fire to the upside (Check the sector etf – IYH). The industrials and transports have already broken out strongly as have the energy sector in spite of WTI threatening her long term supports whilst Brent look better. (Its all part of the strong price action poor fundamentals situation this). Sector wise its very strong stuff and hard to find fault with. Even the US housing supplier sector HGX is starting to look more promising but still no breakout of her 10 month price distribution range.
Market breath wise the JPM don’t pick up on adequately in my view. I don’t want to pre-empt a report in the next few days on this subject but suffice to say that whereas the large caps were previously the weak link in the market now they are the strongest link. The smaller caps in the broader NYSE and Russel2000 are now the weakest link in terms of market breadth as the domestic economy has disappointed yet again and there is still much optimism on the euro recovery lifting world demand. Lets see. The large cap tech stocks remain a little unconvincing in terms of market breath on the nas100 but bring up wider indexes like the XLK and you will again see a beautiful chart breakout and very positive ye forecasts from all. Its that sort of market and in spite of the market breadth issues that remain i wouldn’t try and fight it!
Its a grinding higher market with few sellers. We get weakness in some sectors and the market rotates and grinds higher on each cycle of the rotation from sector themes to other sectors or large caps to mid caps etc. There is an awful lot of good will priced into this market now as earnings continue to disappoint but with Yellen at the Fed the tailwinds remain positive.
The US$ remains under pressure with a fairly strong week after the prior week’s considerable weakness. The eurusd remains unresolved for now. A strong US$ would present yet another fundamental head wind to US equity indexes so we must remain vigilant to this issue. Credit markets remain benign for now display rising rates albeit at very low nominal levels still. Deflation remains the more real threat for now so real interest rates are rising more quickly than the nominal rates display. This issue is not a market timing issue but is becoming an increasing headwind for the market.
Here the JPM weekly equity report:
Many reports to come inc the fundamental report updates.
All the best
Rich