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Back to basics: Is this market overvalued?

There has been a recent continuing controversy about the usefulness of forward P/E as a valuation tool in the current recessionary environment. On one hand, past bear markets have typically bottomed out at a forward P/E ratio of 10, with a low of 7 (1982) and a high of 14 (2002). FactSet‘s reported market rating...

The knife fight at the 200 dma

Mid-week market update: For the last two days, the SPX tested the 3000 level and its 200 day moving average levels and finally broke up today. However, market breadth presents a mixed picture. Fresh 52-week highs have been understandably strong for NASDAQ stocks, as they have been the recent leadership. However, new highs for both...

Waiting for the inflection point

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...

What gold tells us about confidence

How badly has the pandemic affected the global economy? The United Nations Development Programme (UNDP) has some answers in a recent report. It expects global human development to decline for the first time this year, and EM economies will bear the brunt of the impact. The International Labour Organization (ILO) estimates that up to half...

Healing?

Mid-week market update: Is the market exhibiting signs of froth, or is the economy healing? There are signs of both. As Fed chair Powell indicated, the economy has encountered a health related shock, and the Fed can only do so much to stabilize markets. It cannot provide a cure. Some of the market based indicators...

Earnings Monitor: Digging in for the long haul

We are continuing our coverage of earnings season during these turbulent times. With 90% of the index having reported, this will be the final earnings monitor of the Q1 earnings season. This week, we are seeing greater additional signs of stabilization, but companies are digging for the long haul. Let’s begin with the big picture....

The bulls are losing control, what’s next?

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...

Checking the small business economic barometer

During past major market bottoms, the outperformance of small cap stocks has coincided with economic rebounds. The relative returns of small and microcaps appear to be trying to bottom. It is time to check in on how these stocks are doing.     One way to monitor the progress of these stocks is to check...

The start of a new bear leg?

Mid-week market update: Is this market starting a new bear leg? There are numerous signs that may be happening. The SPX violated the trend line of a rising channel while the stochastic recycled from an overbought reading, which is a sell signal. The chart of the equal weighted index, which filters out the effects of...

FIFO: Can China save global growth (again)?

Remember the Great Financial Crisis (GFC)? As the GFC engulfed the global economy, China stepped up with a shock-and-awe campaign of fiscal and monetary stimulus that stabilized not only the Chinese economy, but global growth. Can China save global growth again? China recently reported surprisingly strong export growth for April, but the closely watched early...