Jose Nunez

S&P 500 Value Call

FX:SPX500   S&P 500 Index
107 0 3
The big index as measure by capitalization of the biggest 500 company traded in the NYSE, nasdaq and Amex in the US market has drop about 4% from the recent peak at or about 2078. What this drop mean for you as an investor or money manager or trader? .... it mean a great opportunity to make huge profit on the US market trading the S&P 500             Future, CFD             , the SPY             for lower risk investor as well as to benefit from the new leg up in the market.

How the S&P 500             look from a Sentiment, Technical and Valuation standpoint as well as from metric valuation perspective:

Sentiment Intermarket Analysis:

Sentiment valuation relative to interest rates has just crossed to positive territory at 0.30% discount spread indicating a bottom on the S&P 500             is real near or around the corner. S&P 500             closed on friday at 1997.00 and sentiment value closed at 2002.25. Rates closed on friday at 2.083% and in our prior call we call for a drop on rates below the 2.05% for the S&P 500             to rally big time. Watch closely the bond market as an indication for the S&P 500             to rally big specially if the bond market rates fall to the 2.05% to 1.90% level that will indicate a bottom with almost 100% probability.

What will happen from a valuation standpoint if rates fall to 1.92% to 1.90%? .... Simple, the discount spread on the Sentiment Intermarket Valuation will increase to 1.96% indicating a discount greater than the 10 YR yield benchmark. A discount of 1.96 relative to 1.92% yield a ratio of 1.02 a historically BUY Signal on the S&P 500             due to extremely undervaluation in the short term.

Fundamental Valuation Analysis:

The next 12 Months Intrinsic Value for the S&P 500             is at 2092.25 and this value will most likely increase at the end of december when the 2014, 4Q end. At this point the market is selling at a discount to intrinsic value of 4.81% what makes a great opportunity to start accumulating shares on the US markets by investors and fund managers. The cost to be in the US market is 5.06% and with a discount to Intrinsic value at 4.81% makes a relative ratio of 0.95 almost 1 the desire ration to enter any variable market since it mean that you have enter a market without paying any cost.

What is the ideal price to enter this market based on Fundamental Analysis? ..... if you are to accumulate shares, at a current price of 1997 on the S&P 500             is a good price to start, however the best price is below 1981 because 1981 is the Intrinsic value for the next 9 months, buying below 1981 mean buying a market at a quarter discount.

Technical Analysis:

The median Volatility pricing for the S&P 500             is at 1979.75 meaning an expected drop to at least below the 1980 level.
based on daily volatility the market imply a potential drop to the 1949 level as an extreme reaction for this leg down of market. Buying at or below the extreme daily volatility should be consider one or maybe the best opportunity you could have to enter the S&P 500             without meaningful risk.

Based on the basis 3 form of market analysis, we conclude to rate this market as NEUTRAL to LONG with emphasis in accumulating!

*Key to watch:

*10 YR Yield drop between 2.05% to 1.90%, below 1.92% mean a great change to make huge profit.
*1980 should be consider a fair entry price for long position
*1949 should be consider as the extreme lower price zone for the S&P 500             from there with rates below 2.05% or close the rally will be imminent!

Done by:

Jose Gomez Nunez,
Valuation Specialist and Charter market Analyst
ValueRule CEO             ,

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