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How to estimate S&P 500 downside risk

As we approach Q3 earnings season, the Street cut the bottom-up S&P 500 forward 12-month EPS estimates by an estimated -0.41% as recession anxiety begins to rise. The good news is the market is trading at a forward P/E of 15.8, which is below its 5- and 10-year averages.     In light of the...

The right and wrong way to throw in the towel

Preface: Explaining our market timing models  We maintain several market timing models, each with differing time horizons. The “Ultimate Market Timing Model” is a long-term market timing model based on the research outlined in our post, Building the ultimate market timing model. This model tends to generate only a handful of signals each decade.   The Trend...

What the Fed and FedEx are telling the markets

Both the Fed and FedEx had messages of recession for the markets. Fed Chair Jerome Powell said that the Fed would raise rates until there was clear and convincing signs that inflation was headed toward its 2% target, and its projections amounted to a recession that begins either late this year or early next year....

Higher for longer

Mid-week market update: The Fed has spoken. As expected, it hike interest rates 75 bps. In its Summary of Economy Projections (SEP), it sharply lowered GDP growth for this year and it raised the Fed Funds projection to 4.4% for this year and 4.6% next year, which are both ahead of market expectations. In other...

A flock of hawks circle Wall Street

Preface: Explaining our market timing models  We maintain several market timing models, each with differing time horizons. The “Ultimate Market Timing Model” is a long-term market timing model based on the research outlined in our post, Building the ultimate market timing model. This model tends to generate only a handful of signals each decade.   The Trend...

Fed: Do you believe us now?

Mid-week market update: Yesterday’s hot CPI report finally convinced the market that the Fed is serious. For weeks one Fed official after another gave the same message: We will raise rates to about 4% and hold them there while we evaluate the inflation picture. We don’t want a repeat of the 1970s when the Fed...

How I learned to stop worrying and love the bond market

Preface: Explaining our market timing models  We maintain several market timing models, each with differing time horizons. The “Ultimate Market Timing Model” is a long-term market timing model based on the research outlined in our post, Building the ultimate market timing model. This model tends to generate only a handful of signals each decade.   The Trend...

Assessing “Big Short” Michael Burry’s crash warning

A number of readers asked me to comment on Michael Burry’s forecast of a crash, according to a report from Business Insider. Doomsday is finally here, he hinted in a since-deleted tweet this week.   The fund manager of “The Big Short” fame shared a screenshot of a S&P 500 chart, showing the benchmark stock-market...

Saved by Fibonacci

Mid-week market update: I suggested on the weekend that the stock market was oversold and poised for a short-term rally (see How to trade the failed breadth thrust). The rally seems to have arrived.   The weakness in the S&P 500 has been stunning as it sliced through multiple levels of support like a hot...