Could it be that the market is finally sensing something good? Is it possible that the long-held fear and uncertainty that has kept retail investors offline and big money players in bonds and commodities are finding their way out the door? Are we on the cusp of a major rally, one that will take us back to heights not seen since December 2007?
I have been saying for some time a rally would come, but I based that belief on my intuition, my historical understanding, and my obsessive tracking of the market/economic fundamentals. Time and again, my intuition let me down, the historical cycle fell out of synch, and the market/economic fundamentals moved like the roller coaster at Coney Island.
Perhaps it is my intuition ringing again, or perhaps the historical cycle is coming back into synch, or, perhaps, the upside roll of the market/economic fundamentals is luring me into a sense of optimism. Perhaps, but it is also possible the global market is running out of things to fear, that some certainty is replacing the mass of uncertainty, that investors are beginning to believe again. I have no prediction – just sensing a change in the tone of it all …
How does one read fundamental analysis and how does one interpret what one reads?
Wow! What a timely question. It fits so snugly into the above. You readers are so on top of it. Anyway, the question is a broad one, so I will answer it broadly and then give an example both broad and explicit of what information one looks for when deciding to place a market bet.
Fundamental analysts have two types of fundamentals at their disposal. Broadly, there are financial fundamentals – P/E ratios, profit and operating margins, income, etc. and there are market fundamentals – money flow, economic indicators, political considerations, etc. The former is specific and the latter is contextual. Both are important and one needs both to find good market plays. You have to know your market intimately inside and out.
The insufficient answer to your question, then, is you need to learn how to read the complex financial fundamentals of a market and you need to stay current on things that affect a market, such as news, government data, and money flow. You have to work and study, study and work, and then do more of both.
Below is an example of fundamental data on a broad market that can be used to specifically trade that market or it can be used as contextual when deciding about trading any market. One can go from this data to specific profit data on any company in the S&P 500, and from there to specific financial fundamentals on any specific company.
Profits in the Standard & Poor’s 500 Index are rising faster than its price, leaving the gauge 9 percent cheaper than it was in April … Corporate profits have topped analyst estimates for 12 straight quarters. Analysts that cover companies in the S&P 500 project earnings will rise this year to $104.27 a share, the highest level ever … That would represent a 69 percent increase in earnings since 2009, compared with the 22 percent rally in the index in the past two years.
Fundamentally, this data suggests a broad rally is coming. If so, then specific equities will climb. Which ones are for you to find. You can do it if you know how to read both the explicit and implicit fundamentals. This is the best I can do in my space. You need to take it from here.
Trade in the day – Invest in your life …
