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S&P 500 earnings are in for 2024 Q3, and here is our valuation analysis.

The following chart shows the normal value range of the S&P 500 Index, indicating where the S&P 500 would have to be in order to have an overvalued P/E of 20 (red line), a fairly valued P/E of 15 (blue line), or an undervalued P/E of 10 (green line). Annotations on the right side of the chart show where the range is projected to be based upon earnings estimates through 2025 Q3.



Historically, price has usually remained below the top of the normal value range (red line); however, since about 1998, it has not been uncommon for price to exceed normal overvalue levels, sometimes by a lot. The market has been mostly overvalued since 1992, and it has not been undervalued since 1984. We could say that this is the “new normal,” except that it isn’t normal by GAAP (Generally Accepted Accounting Principles) standards.

We use GAAP earnings as the basis for our analysis. The table below shows earnings projections through September 2025. Keep in mind that the P/E estimates are calculated based upon the S&P 500 close as of December 31, 2024. They will change daily depending on where the market goes from here. It is notable that the P/E remains outside the normal range.

The following table shows where the bands are projected be, based upon earnings estimates through 2025 Q3.

This DecisionPoint chart keeps track of S&P 500 fundamentals, P/E and yield, and it is updated daily — not that you need to watch it that closely, but it is up-to-date when you need it.

CONCLUSION: The market is still very overvalued and the P/E is still well above the normal range. Earnings have ticked up and are projected to trend higher for the next four quarters. Being overvalued doesn’t require an immediate decline to bring valuation back within the normal range, but high valuation applies negative pressure to the market environment.


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Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional. Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.

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S&P 5850 has been the most important “line in the sand” for stocks since the pullback from the 6000 level in November 2024. With the SPX closing below that 5850 level on Friday, we see further corrective pressures with the 200-day moving average as a reasonable downside target. Today, we’ll break down a series of projection techniques that have helped us hone in on this potential area of support.

The Break of 5850 Completes a Head-and-Shoulders Top

One of the most widely-followed patterns in technical analysis, the fabled head-and-shoulders topping pattern, is formed by a major high surrounded by lower highs on each side. After the S&P 500 established a lower high in December, we immediately started looking for confirmation of this bearish pattern.

To confirm a head-and-shoulders top, and initiate downside targets on a chart, the price needs to break through the “neckline” formed by the swing lows between the head and two shoulders. While price pattern purists may advocate for a downward-sloping trendline to capture the intraday lows of the neckline, I’ve been focused on the price level of SPX 5850. As long as the S&P remained above that level of support, then the market could still be considered in a healthy bullish phase. But a close below the 5850 level on Friday tells me that this corrective move may just be getting started.

Let’s consider some ways to identify a potential downside objective, first using the pattern itself.

Calculating a Minimum Downside Objective

As delineated in Edwards and Magee’s classic book on price patterns, you can use the height of the head-and-shoulders pattern to identify an initial downside objective. Basically, take the distance from the top of the head to the neckline, and then subtract that value from the neckline at the breaking point.

Based on my measurements on the S&P 500 chart, this process yields a downside target of right around 5600. It’s worth noting that Edwards and Magee considered this a “minimum downside objective”, implying that there certainly could be further deterioration after that point has been reached.

Now let’s consider some other technical analysis tools that could help us to validate this potential downside target.

A Confluence of Support Confirms Our Measurement

If we create a Fibonacci framework using the August 2024 low and the December 2024 high, we can see a 38.2% retracement around 5725, which lines up fairly well with the swing low from late October. Perhaps this could serve as a short-term support level during the next downward phase?

As I review the chart, however, I’m struck by the fact that the 50% retracement lines up almost perfectly with our price pattern objective. Many early technical analysts, including the infamous W.D. Gann, favored the 50% retracement level as the most meaningful to watch.

You may also notice that the 200-day moving average is gently sloping higher, rapidly approaching our “confluence of support” around 5600. Given the agreement between multiple technical indicators on this price point, we consider it the most likely downside target given this week’s breakdown.

I would also point that while I feel that identifying price targets can be a helpful exercise, as it gives you a framework with which to evaluate further price action, the most important signals usually come from the price itself. How the S&P 500 would move between current levels and 5600 may tell us a great deal about the likelihood of finding support versus a more bearish scenario in the coming weeks.

RR#6,

Dave

P.S. Ready to upgrade your investment process? Check out my free behavioral investing course!


David Keller, CMT

President and Chief Strategist

Sierra Alpha Research LLC


Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional.

The author does not have a position in mentioned securities at the time of publication. Any opinions expressed herein are solely those of the author and do not in any way represent the views or opinions of any other person or entity.

Sudan’s army said on Saturday it had entered the central city of Wad Madani and was pushing out its paramilitary rivals the Rapid Support Forces (RSF), a step which if completed successfully would be its biggest gain in near two years of war.

The army posted a video appearing to show troops inside the city, which is the capital of El Gezira state, an agricultural and trading hub that has been held by the RSF since December 2023.

Recapture of the state as a whole could mark a turning point in the war that began in April 2023 over disputes on the integration of the two forces, which has created one of the world’s largest humanitarian crises with the displacement of more than 12 million people and half the population facing hunger.

“The leadership of the Armed Forces congratulates our people on the entry of our forces into Wad Madani this morning. They are now working to clean up the remaining rebel pockets inside the city,” an army statement said.

The state, located in the center of the country and south of the capital Khartoum has seen some of the RSF’s bloodiest attacks on civilians, as well as the burning of fields, looting of hospitals and markets, and flooding of irrigation ditches.

Despite a long history as an agricultural trade hub, Madani has been marked by experts as an area at risk of famine due to the blockades imposed as part of the conflict.

The army had stepped up its campaign to retake El Gezira in recent months, after retaking Sennar state in the south, including by increasing airstrikes that have often hit civilians.

The RSF’s top commander in the state defected to the army in October, and his troops took part in Saturday’s operations, though the RSF responded at the time with a series of attacks.

The army also on Saturday continued its operations on the city of Bahri, part of the greater capital, where it has also made advances in recent months.

The RSF controls most of the west of the country, where it is fighting the army for al-Fashir, its last stronghold in the Darfur region. The two forces are also actively fighting over White Nile state in the south of the country.

This post appeared first on cnn.com

Six people died when a propane-butane cylinder exploded at a restaurant in the northwest Czech city of Most, setting the building on fire, emergency services said on Sunday.

Eight people were injured in the fiery blast that occurred late on Saturday evening, and 30 people were evacuated from the restaurant and surrounding buildings, the Czech fire rescue service said on X social media platform.

“According to initial information from witnesses, a heater overturned, causing a fire,” the fire brigade said.

Interior Minister Vit Rakusan told Czech Radio the cause was likely a propane-butane heater overturning in the restaurant’s front garden.

The fire brigade said it had rescued one seriously injured restaurant guest who had been trapped in a bathroom.

Around 20 guests were in the restaurant at the time of the explosion, Czech Radio said.

This post appeared first on cnn.com

Italy’s justice minister has asked an appeals court to revoke the arrest of an Iranian citizen wanted by the US over a drone attack in Jordan that killed three Americans a year ago.

Mohammad Abedini was scheduled to appear at a Milan court on Wednesday in connection with his bid for house arrest pending the extradition process to the U.S.

Iranian state TV said Sunday Abedini will return to Iran “within hours.” The report said the release and return of Abedini came after Iran’s foreign ministry pursued the case, as well as “talks” between Iran’s intelligence ministry and the Italian intelligence service.

Abedini was arrested on a US warrant on December 16, three days before Italian journalist Cecilia Sala was detained while on a reporting trip to Iran. Sala, who was believed held as a bargaining chip for Abedini’s release, returned home last week, giving rise to speculation about his fate.

An official note released by the Justice Ministry on Sunday said that under Italy-US extradition treaties, “only crimes that are punishable according to the laws of both sides can lead to extradition, a condition which, based on the state of documents, can’t be considered as existing.”

The ministry said that the potential charge against Abedini — criminal association for violating the International Emergency Economic Powers Act, a US federal law — “did not correspond to any conduct recognized by Italian law as a crime.”

The US Justice Department has accused Abedini of supplying the drone technology to Iran that was used in a January 2024 attack on a U.S. outpost in Jordan that killed three American troops.

Italian Premier Giorgia Meloni described a “diplomatic triangulation” with Iran and the United States as being key to securing Sala’s release, confirming for the first time that Washington’s interests in the case entered into the negotiations.

Sala’s release came after Meloni made a surprise trip to Florida to meet US President-elect Donald Trump at his Mar-a-Lago estate.

This post appeared first on cnn.com

Israeli Prime Minister Benjamin Netanyahu has spoken with US President Joe Biden about the progress in negotiations for a Gaza ceasefire-hostage deal.

“The prime minister discussed with the American president the progress in the negotiations to release our hostages and updated him on the mandate he gave to the negotiating team to Doha in order to advance the release of our hostages,” Netanyahu’s office said in a statement Sunday.

It added, “the prime minister wanted to thank the American President (Joe) Biden and the incoming President Donald Trump for their cooperation for the holy mission.”

The White House said Biden and Netanyahu discussed the negotiations in Doha, based on the proposal the US president laid out in May. Biden once again called for an immediate ceasefire in Gaza, the return of the hostages and increased humanitarian aid to the enclave.

Biden also spoke to Netanyahu about the “fundamentally changed regional circumstances” following the ceasefire in Lebanon in November last year, the collapse of former Syrian President Bashar al-Assad’s regime the following month, and Iran’s weakened position in the region, the White House said.

The call between the two leaders comes as Netanyahu summoned two major critics of Biden’s ceasefire deal proposal to meetings to discuss a potential deal.

Finance Minister Bezalel Smotrich and National Security Minister Itamar Ben Gvir have previously rejected a peace proposal laid out by Biden in May of last year, which would pair a release of hostages with a “full and complete ceasefire.” Both ministers rejected the idea of an immediate ceasefire and have called for fighting to continue until Hamas is destroyed and all hostages are returned.

The far-right ministers have previously threatened to resign and topple Netanyahu’s governing coalition if he accepted Biden’s proposal.

The meetings with the Israeli cabinet members on Sunday come as Israeli negotiators have expressed “cautious optimism” at the talks ongoing in Doha this weekend, which involve a high-level Israeli delegation including Mossad chief David Barnea.

This is a developing story and will be updated.

This post appeared first on cnn.com

Croatia’s opposition-backed President Zoran Milanović, a critic of the European Union and NATO, overwhelmingly won reelection for another five-year term on Sunday, defeating a candidate from the ruling conservative party in a runoff vote, official results showed.

Milanović won more than 74% of the vote compared to his challenger Dragan Primorac, who received nearly 26%, according to the results released by Croatia’s state election authorities after more than 99% of the ballots were counted.

The result presents a major boost for Milanović, who is a critic of Western military support for Ukraine in its war against Russia. Milanović is also a fierce opponent of Croatia’s conservative Prime Minister Andrej Plenković and his government.

In a speech after the results were released, Milanović said his victory was a sign of approval and trust from the voters but also presented a message “about the state of affairs in the country for those who need to hear it.”

“I am asking them (the government) to hear it,” said Milanovic. “That is what the citizens wanted to say. This is not just support for me.”

Milanović, 58, is the most popular politician in Croatia, and is sometimes compared to US President-elect Donald Trump for his combative style of communication with political opponents.

His triumph sets the stage for a continued political confrontation with PM Plenković, with whom he sparred during his first term.

Milanović also won comfortably in the first round of voting on Dec. 29, leaving Primorac, a forensic scientist who had unsuccessfully run for president previously, and six other candidates far behind.

The runoff between the top two contenders was necessary because Milanović fell short of securing 50% of the vote by just 5,000 votes, while Primorac trailed far behind with 19%.

The election was held as Croatia, which has a population of 3.8 million, struggles with biting inflation, corruption scandals and a labor shortage.

Upon voting on Sunday, Milanović again criticized the EU as “in many ways non-democratic” and run by unelected officials. The EU position that “if you don’t think the same as I do, then you’re the enemy” amounts to “mental violence,” Milanović said.

“That’s not the modern Europe I want to live and work in,” he said. “I will work on changing it, as much as I can as the president of a small nation.”

Milanović served as prime minister in the past with a mixed record.

He regularly accuses Plenković and his conservative HDZ of systemic corruption, while Plenković has labeled Milanović “pro-Russian” and a threat to Croatia’s international standing.

Political analyst Višeslav Raos said the increasingly outspoken Milanović has no motive to “try to please someone or try to control himself.”

“If there was no cooperation with the prime minister for the first five years (of his presidency), why would there be now?” he said.

Though the presidency is largely ceremonial in Croatia, an elected president holds political authority and acts as the supreme military commander.

Milanović denied he is pro-Russian but last year, he blocked the dispatch of five Croatian officers to NATO’s mission in Germany called Security Assistance and Training for Ukraine. He also pledged he would never approve sending Croatian soldiers as part of any NATO mission to Ukraine. Plenković and his government say there is no such proposal.

Despite limited powers, many believe the presidential position is key for the political balance of power in a country mainly governed by the Croatian Democratic Union, or HDZ, since gaining independence from Yugoslavia in 1991.

Primorac, 59, entered politics in the early 2000s, when he was science and education minister in the HDZ-led government. He unsuccessfully ran for the presidency in 2009, and after that mainly focused on his academic career including lecturing at universities in the United States, China and in Croatia.

This post appeared first on cnn.com

An Austrian woman has been kidnapped by gunmen in Niger’s Agadez city, local residents and the Austrian foreign ministry said on Sunday, the first time a European citizen is known to have been kidnapped in the conflict-hit West African nation since a military junta took power in 2023.

The ministry said Austria’s embassy in Algeria, which is also responsible for Niger, had been informed of the kidnap of an Austrian woman in Agadez and was in contact with regional authorities on the ground.

Residents and local media identified the victim as Eva Gretzmacher and reported she is an aid worker who has lived in Agadez – hundreds of kilometers (miles) away from the capital city of Niamey – for more than 20 years.

“(She) is well known for her social commitment (and) created a skills center in 2010 that initiated various projects, notably in the fields of education, women’s empowerment, ecology, culture and art,” the local Air Info Agadez reported.

Gretzmacher also supported education programs through her development work and provided assistance to local non-government organizations in various sectors, local media said.

No group claimed responsibility for her abduction and authorities in Niger did not immediately comment on the incident.

Niger has for many years battled a jihadi insurgency linked to al-Qaida and the Islamic State group, a security crisis that analysts say has worsened since the military toppled the country’s government in July 2023.

Despite their promise to restore peace in hot spots, the junta’s capacity to improve Niger’s security has increasingly been questioned amid increasing attacks.

Niger was seen as one of the last democratic countries in Africa’s Sahel region that Western nations could partner with to beat back the jihadi insurgency in the vast expanse below the Sahara Desert.

The country has severed decades-long military ties with the West and turned to Russia as a new security partner.

This post appeared first on cnn.com

(AP) — An emergency task force arrived in Russia’s southern Krasnodar region on Sunday as an oil spill in the Kerch Strait from two storm-stricken tankers continues to spread a month after it was first detected, officials said.

The task force, which includes Emergency Situations Minister Alexander Kurenkov, was set up after Russian President Vladimir Putin on Friday called on authorities to ramp up the response to the spill, calling it “one of the most serious environmental challenges we have faced in recent years.”

Kurenkov said that “the most difficult situation” had developed near the port of Taman in the Krasnodar region, where fuel oil continues to leak into the sea from the damaged part of the Volgoneft-239 tanker.

Kurenkov was quoted as saying by Russian state news agency RIA Novosti that the remaining oil will be pumped out of the tanker’s stern.

The Emergencies Ministry said Saturday that over 155,000 tons of contaminated sand and soil had been collected since oil spilled out of two tankers during a storm four weeks ago in the Kerch Strait, which separates the Russia-occupied Crimean Peninsula from the Krasnodar region.

Russian-installed officials in Ukraine’s partially Russian-occupied Zaporizhzhia region said Saturday that the mazut — a heavy, low-quality oil product — had reached the Berdyansk Spit, some 145 kilometers (90 miles) north of the Kerch Strait. It contaminated an area 14.5 kilometers (9 miles) long, Moscow-installed Gov. Yevgeny Balitsky wrote on Telegram.

Russian-appointed officials in Moscow-occupied Crimea announced a regional emergency last weekend after oil was detected on the shores of Sevastopol, the peninsula’s largest city, about 250 kilometers (155 miles) from the Kerch Strait.

In response to Putin’s call for action, Ukraine’s Foreign Ministry spokesman Heorhii Tykhyi accused Russia of “beginning to demonstrate its alleged ‘concern’ only after the scale of the disaster became too obvious to conceal its terrible consequences.”

“Russia’s practice of first ignoring the problem, then admitting its inability to solve it, and ultimately leaving the entire Black Sea region alone with the consequences is yet another proof of its international irresponsibility,” Tykhyi said Friday.

The Kerch Strait is an important global shipping route, providing passage from the inland Sea of Azov to the Black Sea. It has also been a key point of conflict between Russia and Ukraine after Moscow annexed the peninsula in 2014.

In 2016, Ukraine took Moscow to the Permanent Court of Arbitration, where it accused Russia of trying to seize control of the area illegally. In 2021, Russia closed the strait for several months.

Mykhailo Podolyak, an adviser to the head of Ukrainian President Volodymyr Zelensky’s office, described the oil spill last month as a “large-scale environmental disaster” and called for additional sanctions on Russian tankers.

This post appeared first on cnn.com

Islamabad, Pakistan (Reuters) — Nobel Peace Prize winner Malala Yousafzai urged Muslim leaders on Sunday to back efforts to make gender apartheid a crime under international law, and called on them to speak out against Afghanistan’s Taliban over its treatment of women and girls.

At a summit on girls’ education in Muslim communities attended by international leaders and scholars in her home country of Pakistan, Yousafzai said Muslim voices must lead the way against the policies of the Taliban, who have barred teenage girls from school and women from universities.

“In Afghanistan an entire generation of girls will be robbed of its future,” she said in a speech in Islamabad. “As Muslim leaders, now is the time to raise your voice, use your power.”

The Taliban say they respect women’s rights in accordance with their interpretation of Afghan culture and Islamic law. Taliban administration spokespeople did not immediately respond to a request for comment on Yousafzai’s statements.

No foreign government has formally recognized the Taliban since it took over Afghanistan in 2021 and diplomats have said steps towards recognition require a change of course on women’s rights.

Yousafzai survived being shot in the head when she was 15 in Pakistan by a gunman after campaigning against the Pakistani Taliban’s moves to deny girls an education.

The summit, organised by the Organization of Islamic Cooperation (OIC) and the Muslim World League, included dozens of ministers and scholars from Muslim-majority countries.

Yousafzai asked the scholars to “openly challenge and denounce the Taliban’s oppressive laws” and for political leaders to support the addition of gender apartheid to crimes against humanity under international criminal law.

The summit was hosted by Pakistan, which has had frosty relations with the Afghan Taliban in recent months over accusations that militants are using Afghan soil to launch attacks on Pakistan, a charge the Taliban deny.

This post appeared first on cnn.com