Short-Termism Vs. Optimism: Weekly Nifty 9 Must Knows

You have heard me say many a time over the last 90 days that I would be looking for FY2020 EPS to come in with a $140+ handle, not a $138+ handle. It would appear as though my sentiment and outlook may come to fruition at the early stages of Q4 reporting season. Additionally, this is now the key question FactSet has posed in its weekly report, as follows:

Research Report Insight #6

Goldman Sachs reminds investors that without the ability to fully assess the validity of current economic forecasts, valuations are historically rich for equities.

Stocks are currently pinned at max valuations, except when compared with free cash flow (better business models dominate S&P/low debt costs) and bond yields.

Research Report Insight #7

The NAAIM Exposure Index, which provides insight into the actual adjustments active risk managers have made to client accounts over the past two weeks, jumped above 100 again.

Keep in mind that this type of equity market exposure, for more than a month, has not been seen since Q1 2017. Such clustering of market exposure and sentiment had proven to limit market corrections in the past (November 2016 – January 2018) to less than 3% off the all-time high for the S&P 500.

Research Report Insight #8

Elsewhere in “analogueville”…

This image has an empty alt attribute; its file name is Screen-Shot-2021-01-15-at-3.00.46-PM.png

Since fully completing the 2009 analogue in 2020, the 2010 analogue also remains a probable guide for 2021. As displayed in the analogue above, indeed a downturn is supposed to commence on 1/19/2021, as it did on 1/19/2010. Just as the analogue for 2009 was a strong replication in 2020, it may prove to hold similar imperfections for the 2010 analogue related to path and plane/timing. So far in 2021, it seems the alignment is precise and if that persists it calls for an 8.2% total correction in the coming week/s. Such a correction also portends new highs thereafter from March into Q2 2021. One way or another, we’ll have more information regarding the 2010 analogue and 2016-2018 analogue this coming week.

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