With stocks near all-time highs, here's what I'm looking at:Volatility indicesAs The Market Ear noted, the stock market's volatility is much lower than the bond market's volatility right now. The Treasury Note Volatility Index remains elevated, while VIX has fallen after a brief spike:When these 2 volatility indices diverged in the past, VIX had a tendency to jump over the next 2 weeks...... while Treasury volatility usually fell over the next 6-12 months:UtilitiesOver the past few weeks we ...Signup / Login to read this post
The S&P 500 has gone from a 4% drawdown to within 1% of its 52-week high 4 times in about 6 months, the most ever, other times it did so 3 times led to gains; The Dow Transports fell to more than 10% below their high but a DOT index of freight and passenger movement hit an all-time high; The VIX closed below 14; Gold and the dollar are moving together
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.Bond market warningStocks have held up well lately, more or less, but high-yield (junk) bonds are under-performing relative to other parts of the corporate bond market.The cliché is that bond traders are smarter than their stock market cousins, so this should be a troubling sign.We looked at all times since 1990 when the S&P 500 was within 2% of a 52-week ...
Here's what's piquing my interest so far today.Falling VolFear is ebbing a bit, and the VIX is on track to drop below 14 for the first time in weeks. The other times it did so this year, stocks rallied further 2 out of the 3 times.Historically, it has been more of a positive than a negative. It's not so low that it has proven to be a sign of complacency. Only 1 of the signals preceded a loss over the next 6-12 months.Doomsday PreppersCredit card companies keep raising the rates they charge ...
I recently examined the S&P 500's trailing earnings and earnings estimates. My conclusion was:Looking at the trend in earnings can help investors and traders time the market from a long term, fundamental trend following perspective. I originally only tested this concept on the S&P 500. But does this work in other western markets, like Germany, Australia, UK, Canada? Is this strategy (as Ray Dalio calls it) "timeless and universal?" I ran the following strategy on 4 different countries' stock ...
With the stock market virtually flat, here's what I'm looking at:Dividend yield vs Treasury yieldCNBC noted that the S&P 500's dividend yield is greater than the 10 year Treasury yield. According to Bank of America, this is very bullish for stocks because when this happened in the past, stocks significantly outperformed bonds 94% of the time over the next 12 months.Herein lies the problem. This phenomenon (dividend yield > 10 year Treasury yield) has only occurred during this bull market. ...
High-yield (junk) bonds have slid relative to other corporate bonds, a warning from "smart money" bond traders, but it hasn't been a consistent enough sign; The S&P has gained more than 5% over the past 8 months but the % of its members above their 50-day average has not made a higher high; The Smart and Dumb Money Confidence are chopping around neutral
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.NormalizingThe most widely watched Treasury yield curve un-inverted in recent days, triggering some calls that now the risk for stocks has declined, that the worst is over. But that is backwards, as the initial inversion usually isn’t the trigger for trouble in stocks, that comes after the curve starts to normalize.Forward returns in stocks were weak once ...
The stock market continues to swing wildly each day on trade-related news. 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, but this could change IF macro data deteriorates significantly over the next few monthsTechnicals (3-6 months): neutral/bullishTechnicals (1-2 months): no clear edge in ...
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 ...
