When I began this project I sought to replicate something I did on a daily basis while working at a hedge fund as a strategist. That version came about after seeing an interview with David Tepper.
The CNBC interviewer was pressing Tepper because the market hadn't made it to the target he had at the last interview. Tepper fired back, paraphrasing here, "No, I didn't say SPX was going to that level, I said it was going to 18x forward earnings which at that time was about that level. And the market reached 18x forward earnings." I don't remember the level but knew the emphasis on forward earnings was something I needed to check, and did. At the time I had a Bloomberg to do so.
But I no longer have access to a Bloomberg and have lost confidence in this data from the Wall Street Journal. I just don't remember the Bloomberg data flopping around like this. According to WSJ SPX estimates went from about close to 118 first week of June, dropped a bit to about 117, down to 116 mid June, plummeted to under 113 week of 6/24, then immediately jumped back up to 118?
It seems that WSJ is fitting the estimates to match the price. Maybe it is better to use the Yardeni PDF that has his forward p/e and Citigroup Economic Surprise Index on one chart and comment on that. I think the idea of this project is still valid - everyone on Wall St is watching valuation - but somehow the estimates on the major indexes are not so readily available.
If you go to the link and scroll down you will see two charts. One is the Citigroup Index based on USD alone, then Figure 2 combines this with forward consensus expected operating earnings per share. He is citing sources of Standard & Poor's, Thomson Reuters and Citigroup. Anyway, according to that data SPX topped out around 17x forward earnings, so these earnings estimates must be higher than WSJ, or they are using a slightly different system of determining "forward", who knows.
The surprise index continues to not surprise anyone and is chopping around in negative territory. As long as that remains the case safe havens bid and indexes will struggle at resistance. For now I take this to mean Q3R1 - YR1 should be a significant high on SPX if we indeed see that target zone.