About

Rajveer Rawlin received his MBA in finance from the Cardiff Metropolitan University, Wales, UK. He is an avid market watcher having followed capital markets in the US and India since 1993. His research interests includes areas of Capital Markets, Banking, Investment Analysis and Portfolio Management and has over 20 years of experience in the above areas covering the US and Indian Markets. He has several publications in the above areas. The views expressed here are his own and should not be construed as advice to buy or sell securities.

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Wednesday, 29 July 2015

US Stock Market S and P 500 Index, Fundamental and Technical Snapshot

The S and P 500 has fallen over 2% this year. It is time to get some fundamental and technical perspective on the market. First the fundamentals from Multpl.com. Looking at the Shiller P/E ratio we see that the market is into overvalued territory sporting a #P/E of over 23.


Next looking at the #dividend yield on the S and P 500 below, it is closing in on all time lows also suggestive of an overvalued market.


For a technical picture I turn to Permabear Doomster for some long term perspective. The market appears over stretched long term with no meaning full correction since 2011. It has broken down below 1840 after making a series of lower highs between 1940 and 2135. Market internals have broken down and bearish divergences in market indicators implies downside in the upcoming months. Currently a rally has occurred from the lows near 1800 which may not hold in the future:




Support - 2080
Resistance - 2135


 All in all the risk reward trade for the long term appears to be on the down side.

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My belief is that stocks are relatively overvalued compared to bonds and attractive buying opportunities can come along after 1-2 years. In a deflationary scenario no asset class does well other than U.S bonds, the U.S dollar and the Japanese yen, so better to be safe than sorry with high quality government bonds and fixed deposits. Cash is the king always. Of course this varies with the person's age.