Testy Tuesday – Can We Hold onto the New Highs?

2,982.  

That's where the S&P 500 crested yesterday and now we're back to 2,965 this morning after falling to 2,855 yesterday afternoon.  We're so close to 3,000 that is makes no sense at all to be bullish into the holiday weekend as S&P 3,000 is going to be a tough line to cross as it's up 2,334 points (350%) from the March 2nd, 2009 low of 666.  

Clearly companies are not making 350% more money than they did in 2009 but that's a false benchmark because the stocks were clearly UNDERvalued at the time and 666 was stupidly cheap for the S&P 500 but S&P 3,000 is still going to cause people to question valuations and, as I noted in yesterday's Report, Corporate Profits are very unlikely to justify these record highs and we begin to see those results on July 15th, as Q2 earnings begin coming in volume. 

The run to 3,000 has come off our most recent consolidation at 2,400 and before that 2,000 and there's nothing wrong with moving up 20% (400 points) between 2015 and mid-2017 – that's pretty normal for 2.5 years but, just 2 years after that, we're up 600 more points and that's probably a bit much.  We WERE having healthy consolidation around the 2,800 mark in 2018, when S&P 500 companies combined for $134.95 per share, giving the S&P 500 a Price/Earnings Ratio of 17.78 at 2,400.  For Q1 of this year, we are pacing at $135.73, just a 0.5% improvement but, as we close in on 3,000 on the S&P, that's up 25% – and the P/E Multiple at 3,000 is 22.10 and that's up 24.3% – see the pattern?  

I know it may not seem like it when you have a runaway market and it's easy to say that Fundamentals don't matter but they do to the people who aren't trading every day.  The silent majority of traders are the buy and hold fund managers who hold 

 

IN PROGRESS