The Daily Sentiment Index of NASDAQ traders pushed to 94%, which made the 5-day average rise to 92.4%. This is the most extreme reading in over 14 years and the third highest on record. Traders are nearly certain that the NASDAQ will continue to rally from near current levels. Traders are as bullish as at … Continue reading Hopes are high, but how smart is your investment strategy?
Mixed signals or confirming signals? There are four variables that can determine whether the current secular stock market cycle is in bull or bear territory: P/E, dividend yield, inflation rate, and bond yields. P/E is the pure measure of the stock market valuation level, especially when it is normalized for the business cycle. Dividend yield, … Continue reading Bull or Bear?
As the bull market began in August 1921, the S&P 500 price-to-earnings ratio was 14. In September 1926, three years before the 1929 peak, the market's p/e ratio was 10.72, even more subdued than in 1921. By the time that September 1929 arrived, the market's p/e ratio had jumped to 20.17. At the February high … Continue reading Sorry, stocks are more like they were in the year 2000 not 1921
If you take a look (below, first chart) at the participation rate by itself, you can see the 2020 peak was in February. Since the pandemic struck, the participation rate's "recovery" has barely made it halfway back to the level it was at prior to the pandemic. It has now stalled and is looking like … Continue reading The deflationary headwinds are strong and broad
Assume for a moment that you must pick one of two investment portfolios. The first one is a buy and hold approach where you get all the upside to return—and all of the downside—of the stock market. The second portfolio is built such that it often gets one-half of the upside and one-half of the … Continue reading What Beats Buy and Hold
Analysts and economists are in unanimous agreement that March 2020 was the start of a new, long-term bull market. Optimistic sentiment is not consistent with the start of enduring bull markets. Bulls emerge from times of deep-seated pessimism, when few investors believe that stocks have the ability to rally for any sustained period. The current … Continue reading Leverage reflects the start of a bear not a bull
Many market observers focus on the news as the price driver. But consider Friday, Dec. 4 (Marketwatch): 'Job growth has seriously slowed' "The November jobs report on Friday showed the coronavirus battered U.S. economy regained 245,000 jobs last month … the "labor market is losing momentum.” Conventional wisdom says that investors react to news, stocks … Continue reading The news doesn’t drive stock prices
Deflation is taking hold in the eurozone: Major central banks around the globe might be engaged in a manic policy of monetary and public debt inflation, but deflation is growing. Last month, banks reported that corporate loan demand and personal credit card use are declining, and savings rates remain high. A declining social mood appears … Continue reading Deflation is taking hold in the Eurozone
Money flow is signaling a potential trend reversal in stocks. The Money Flow Index (MFI) is a momentum indicator that measures the flow of money into and out of the market. It's like the Relative Strength Index (RSI) but incorporates volume, whereas the RSI only considers price. Oversold levels typically occur below 20 and overbought … Continue reading Money Flow Is Signaling A Potential Trend Reversal In Stocks
The CAPE ratio has now climbed to its highest level outside of the 2000 bubble. We also now have gone above the 1929 stock market peak and the peak in January 2018. Those who care about fundamentals know that central bank interventions in both the bond market and the broader economy are deflationary. Interventions are … Continue reading Current stock valuations are historic