Fundamentals

This is not my area of expertise. There are slews of people doing very sophisticated financial modeling so if you want that to guide your strategy I'm sure they are not hard to locate. But I like to incorporate two fundamental factors into the decision making process.

The first is valuation, and this means forward P/Es on the benchmark indexes. This is what Wall Street is doing to arrive at all those year end targets. SPX earnings estimate x multiple = price. That's it. Now a lot may go into the estimates and then who knows how they arrive at what multiple they expect people to pay. But often there are turns on the big round numbers as discussed here and in more detail here. 

Now for the other component. I've just discovered a decent enough source for the Citigroup Economic Surprise index, at least the USA version. Now in the age of "good news = bad news" this was not a lock, but I did notice that moves in these indexes (they exist for China, Emerging markets, EU and Japan) did often lead stock indexes a lot of the time. 

Big money loves to buy improving fundamentals but if it is expected then it is already baked into the cake. But the surprise index measures just that, what is coming in as a beat. Nifty. 

Yardeni is including it here in what may be a daily PDF (?). Note the weakness throughout 2015 with the year end drop leading the plunge in January. And the move up from lows has confirmed the rally. Without seeing the detailed level that would be available directly on the report through Citi (or a Bloomberg if you have that!) it is hard to tell when the turn up began. If you want to follow this yourself, google "Citigroup Economic Surprise Index + Yardeni". 

Main point from here is that it has come back to even. This continuing into positive territory "should be" bullish for USA stocks and bearish bonds, although USA stocks may then have to worry about rate hike. But returning to negative territory very likely bearish stocks and bullish bonds.