With the U.S. stock market rallying back towards all-time highs, here's my market outlook:Long term risk:reward doesn’t favor bulls. Valuations are high, but valuations can remain high for years before stocks crash.Fundamentals (6-12 months): still bullish because there is no significant U.S. macro deterioration.Technicals (3-6 months): neutral/bullish Technicals (1-2 months): bearishFundamentals (6-12 months)The economy and the stock market move in the same direction in the long term. ...Signup / Login to read this post
This is Part 2 of a weekly update on the U.S. stock market's long term fundamentals. Part 1 can be found here. Fundamentals 1-3 years: market timingI don't try to predict the future of the economy. Plenty of very smart people try, and when you add up the successes+failures, the results are usually no better than a 50/50 coin toss. That's why I focus instead on leading economic indicators. Look at what has already happened instead of predicting the future.The economy drives corporate ...
More splits in the bond market, with CCC rated debt selling off while BB rated debt rallies, causing the spread to widen to a multi-year extreme; Options traders are pricing in calm near-term conditions (i.e. a low VIX) but paying up for 1-year put protection; Stocks jumped on a Nonfarm Payroll beat; Hedgers bought natty gas and sold metals again
This is an abridged version of our recent reports and notes. For immediate access with no obligation, sign up for a 30-day free trial now.Insiders’ insightsThe ISM survey of purchasing managers continues to hover near its lowest level in years, even while the gain in stocks over the past 12 months is among its best in years. That is an unusual disconnect, with bulls and bears arguing about what it means.Bulls want to assume this means that stock investors are correctly anticipating an upturn ...
As stocks bounce around all-time highs, here's what I'm looking at:NYSE HiLo Logic IndexThe NYSE HiLo Logic Index, which looks for split market conditions in terms of breadth, is a very useful indicator when applied to trading models. The HiLo Index was quite high a few weeks ago (bearish for stocks). But given the recent small pullback in stocks, the HiLo Index has declined back to 0.5Is this the all-clear sign for stocks?Here's what happened next to the S&P when the HiLo Index went from ...
Even as stocks have rallied over the past 12 months, the ISM survey of purchasing managers is near its lowest level in years, a very unusual divergence; Individual investors in the AAII survey increased their exposure to stocks, greatly reducing their cash; The ISM non-manufacturing survey has dropped too; The Shanghai Composite is unusually calm
This is an abridged version of our recent reports and notes. For immediate access with no obligation, sign up for a 30-day free trial now.Blow-off behavior?Heading into Thanksgiving, stocks just couldn’t lose. The S&P 500 managed to sport a positive return on all common time frames, with a strong median gain, while hitting new highs to boot.This kind of price strength signaled blow-off conditions a couple of times, but it was not a reliable signal that the gains are too much. Of the 20 times ...
Here's what I'm looking at:ISM Non-manufacturing Business Activity IndexThe ISM Non-manufacturing Business Activity Index for November 2019 came in at 51.6, which is the lowest level since 2009:Tariffs and the ongoing trade war remain key concerns for supply chain managers. When the Business Activity Index fell in the past, it wasn't decisive recessionary signal. While this did happen during 2001 and 2008, it also happened in 1998 (after a major correction) and 2016 (after a major ...
The S&P 500 has rallied on every common time frame, averaging an excellent median return, while hitting new highs, but it was an inconsistent sign of blow-off behavior; Fewer than 0.5% of S&P 500 stocks hit a 52-week high while more than 1% hit new lows; Both the NYSE and Nasdaq triggered Titanic Syndrome warnings; Stocks dropped the first 2 days of December
This is an abridged version of our recent reports and notes. For immediate access with no obligation, sign up for a 30-day free trial now.The 1% ClubThe S&P 500 futures had enjoyed a very long period of calm, going almost 2 months without even a 1% intraday dip. That ended on Monday (and continued Tuesday). Over the past 20 years, there haven’t been a lot of streaks that lasted longer than the one just ended.The fact that the streak lasted as long as it did means there was some upside ...
