S&P 500 bloodbath took quite a few by surprise, but you were thankfully not among them. VIX nicely jumped after approaching my base support area with its upper border of 21.50. Volatility is back, and Friday was a 1-2 punch to those mistakenly believing in the Fed pivot approaching or that the central bank had their back. The Powell put is gone – it hadn’t existed, and the rally off the Jun bottom was chiefly based on stretching the no 100bp hike interpretation a bit too far (and technically, off very oversold stock market readings). Now, expect the headwinds for the bulls to intensify, and dramatically so – the recognition of tightening reality merely started on Friday.
What I would like to talk about today, is valuations, the P/E ratio and price targets – as through the quarters ahead the earnings would go down, and the slowing economy would be reflected in declining (yet persistently sticky) inflation levels, look for P/E to come down through both E and through how much the buyers would be willing to pay for future cash flows. Inflation falling would not prop up the valuations nearly sufficiently enough, and my 3,950 target, is just that – a surefire one to be reached, with solid potential for further gains on the short side. Macroeconomics, momentum, intermarket analysis – I‘m keeping a close eye as always, for this won’t be a one-way slide…
Stay tuned for Monday’s extensive analysis, and have a nice rest of the weekend.
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All essays, research and information represent analyses and opinions of Monica Kingsley that are based on available and latest data. Despite careful research and best efforts, it may prove wrong and be subject to change with or without notice. Monica Kingsley does not guarantee the accuracy or thoroughness of the data or information reported. Her content serves educational purposes and should not be relied upon as advice or construed as providing recommendations of any kind. Futures, stocks and options are financial instruments not suitable for every investor. Please be advised that you invest at your own risk. Monica Kingsley is not a Registered Securities Advisor. By reading her writings, you agree that she will not be held responsible or liable for any decisions you make. Investing, trading and speculating in financial markets may involve high risk of loss. Monica Kingsley may have a short or long position in any securities, including those mentioned in her writings, and may make additional purchases and/or sales of those securities without notice.
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