A Good Start To 2021: Weekly Nifty 9 Charts In Focus

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His calls over the last 30 years have garnered an efficacy rate of just 47 percent. So he’s right less than he’s wrong and has achieved less than a 50/50 performance rate with his market calls. Then why does he garner so much attention when he puts out a “hit piece” like this? I don’t know, and I surely don’t plan on spending time worrying about Grantham’s calls, which are the equivalent of fighting the Fed and fiscal policy of the likes never seen before.

Research Report Insight #7

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Looking ahead and into 2021, FactSet offers the following forecasts:

  • For CY 2020, analysts are projecting an earnings decline of -13.3% and a revenue decline of -1.6%.
  • For Q1 2021, analysts are projecting earnings growth of 16.5% and revenue growth of 3.9%.
  • For Q2 2021, analysts are projecting earnings growth of 46.1% and revenue growth of 14.1%.
  • For CY 2021, analysts are projecting earnings growth of 22.6% and revenue growth of 8.2%.

The current S&P 500 P/E ratio stands at 22.6%, sharply higher than the 10-year average of 15.7 percent. By most metrics, the market is relatively expensive, unless earnings do indeed surpass expectations more quickly. 

Research Report Insight #8

My belief, for which has been substantiated by the preponderance of the evidence, is that the new Dow Theory is connected to the Software and Technology sectors of the market.

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As shown in the chart above, the former split between the old Capex economy and the new economy was ~52% to ~47% in favor of the old economy. The very latest reading at the end of Q3 2020 shows just how relentless software/tech equipment, new economy usurped old Capex economy spending. If I were a betting man, I would not be betting on a trend reversal. “So when they say tech bubble…?” Kind of a longwinded way of saying, “Don’t believe the old Dow Theory hype.” It is not as effective as it used to be.

Research Report Insight #9

The cumulative A/D line is confirming the moves higher in the S&P 500.  The Consumer Discretionary, Health Care, Industrials, Materials, as well as the broader S&P 500 all closed at 52-week highs last week and so too did those sectors’ cumulative A/D lines. 

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Additionally and historically, when the S&P 500 Equal-Weight Index reverses and outperforms the S&P 500 Index like it has since the market bottomed in 2020, it tends to be a good time to buy stocks. (see chart below)

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The Value Line Geometric Composite Index was introduced on June 30, 1961. It is an equally weighted index using a geometric average. Value Line Geometric Index surpassed its 2018 peak and closed at a new all-time high on Friday this past week.

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Thank you for joining us for another trading week and reviewing our weekly “Must Knows”! 

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