#Peaks

#CrudeProduction

Changes on the margin matter. The long-term fundamental crowd is squarely behind a long-energy position with U.S. crude production down nearly -3% Y/Y. Despite the fact that crude inventories are pinned near an all-time high adjusting for a seasonal summer draw, and gasoline consumption is at a high not seen since 2007 yet gasoline inventories are still up 10% Y/Y, the market is still slapping a cycle peak forward multiple with earnings expected to increase by triple digits over the next year. Hope consensus is right.

#Peaks

The current forward multiple is at a new cycle peak on earnings expectations that assume positive S&P earnings growth by Q3 2016, 9% in Q4 2016, and +16% and +14% by Q1 and Q2 2017 respectively. Starting in Q4 of this year, positive earnings growth expectations are baked in for every sector for three quarters through Q2 of 2017. So we’re looking at a market that has been taken to an all-time high on cycle-high buyback activity with a new cycle high forward multiple with optimistic earnings expectations in the denominator as seen in the chart immediately below.

#EHS

Growth in Existing Home Sales slowed to +3.0% YoY in June but the main callout was that the share of sales to 1st-time buyers rose to 33%, marking the highest percentage since July 2012 as unit sales increased to the highest level of the cycle at 1.84M.  The trend here is important because any next leg higher in transaction volumes will require resurgent 1st-time and entry level buyer demand. The past 3 years have been littered with single-month breakout headfakes and false optimism so we’re interested to see if the strength can confirm next month.  The more important housing release will be next week’s Pending Home Sales data for June – which will give us the lead read on sales in the existing market for July.