Market Matters Morning Report Tuesday 7th June 2016
Why we remain bullish US equities One of our better calls over recent years has been the forecasted path for US stocks, in particular it enabled us recently to get very bullish at the start of this year when the S&P500 tested the 1800 area - the broad US market has since rallied a very healthy 16.5%. We look at a number of simple fundamentals to support our technical view and in the case of US stocks the path becomes fairly clear. Technically the S&P500 is unfolding in a classic "Phase 5" advance to complete the bull market rally since the infamous GFC. We remain bullish targeting fresh all-time highs in coming months prior to a 20-30% correction. However with the S&P500 now only 1.2% below all-time highs the risk / reward for purchasing stocks is diminishing and hence buying should be selective with clearly quantified stops. We’re also looking for ‘events’ that provide a trigger for action in our stock selection. Estimating how far the rally to fresh highs will extend is almost impossible hence we will be keeping our finger on the pulse over coming months but our best guess would be at least the 2300 area. The US S&P500 Index Monthly Chart
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