Dow Fair Value - 7 December - Bullish

Fair value range is defined by the value based on consensus earnings forecasts [12,937], and on earnings adjusted for leading economic indicators [12,966]. Currently the Dow Jones is sitting below the range at 12,098 (6th Dec). The most significant change has been an update on the economic data feeding through to the earnings indicator, which has increased to 12,966.

The average value appears to be at around 12950 for now – which is bullish. Whilst fair value looks to be higher than current levels, I continue with a thesis that we continue to experience a range-bound market. Earnings downgrades appear to be flattening off, whilst cash flow continues to be strong for now.

ASX Fair Value 6 December 2011

Fair value range is defined by the value based on consensus earnings forecasts [4,283], and on earnings adjusted for leading economic indicators [4,344]. Currently the ASX (XJO/S&P200) is sitting below the range at4,288(2nd Dec). Compared to the last update on 30 November, the most significant change has been an update on the economic data feeding through to the earnings indicator, which has increased from 4090 to 4344.

The average value appears to be at around 4300 for now. This continues to support my thesis that we continue to experience a range-bound market. During the recent rally to around 4300, net sellers have reduced in number by around 14% from 213 to 183. Sentiment indicators appear to be balanced for now, helping to support a range-bound market.