Bearish warnings, but no trigger

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...

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...

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...

What’s the next market narrative?

This crisis has so far gone through two phases of market psychology. The first phase was panic, as it became apparent that COVID-19 had become a global pandemic, and economies around the world were shutting down. Stock prices rebounded during the hope phase, supported by a flood of fiscal and monetary stimulus, and the hope...

The recovery scenario

The San Francisco Fed recently created a Daily News Sentiment Index, which is derived from 16 major newspapers. In the space of a few weeks, market psychology has turned from "the market is going to retest the March lows" to "the Fed is supporting prices, valuation doesn't matter, the economy is recovering, - Buy". Regular...

For traders: 3 bullish, and 1 cautionary signs

The following note is addressed to short-term traders with time horizons of a week or less. I would like to highlight some three bullish, and one cautionary data points. First, the latest update of the Citi Panic/Euphoria Model is solidly in panic territory. This is contrarian bullish, but recognize that the bullish call is based...

Any more precautionary cuts?

Mid-week market update: Now that the Fed has cut rates a third time, and the upside breakout in the SPX and NDX are holding, what's next?     Are the series of precautionary cuts over?   Dissecting the rate cut Now that Brexit risks have subsided, and trade tensions are receding as the US and...

What to watch for in Friday’s Jobs Report

BLS will be publish the September Jobs Report this Friday. This report will be important for a number of reasons, and it will answer some key questions for investors and policy makers. First, the unemployment rate has been troughing. If history is any guide, a rising unemployment rate after a trough has been signals of...

How not to push back against Trump

Former New York Fed president Bill Dudley penned an explosive and shocking Bloomberg op-ed today: U.S. President Donald Trump’s trade war with China keeps undermining the confidence of businesses and consumers, worsening the economic outlook. This manufactured disaster-in-the-making presents the Federal Reserve with a dilemma: Should it mitigate the damage by providing offsetting stimulus, or...

Buy the dips, sell the rips

Mid-week market update: The SPX has been mired in a trading range for several weeks. Even as the market is once again testing resistance, it is displaying a mild positive RSI divergences, which argues that there may be further minor upside to resistance at about 2950. Nevertheless, this pattern argues for a trading strategy of...

Powell’s dilemma (and why it matters)

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...

A (deceptive) long-term buy signal

Mid-week market update: It is month-end, and the day after an FOMC meeting. Regular readers may recall that I have been monitoring the monthly MACD indicator for a long-term buy signal. Troy Bombardia recently highlighted what happens when the SPX flashes a long-term buy signal. Subsequent one-year returns have been almost all positive.    ...

A hawkish cut ahead?

As we look ahead to the July FOMC meeting this week, market expectations of additional rate cuts have moderated. The market is discounting a 100% chance of a quarter-point cut this week. It also expects an additional quarter-point cut at the September meeting, and a third rate cut by year-end.     The better than...

Is this how currency wars begin?

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...

Will stock prices surge on a Fed rate cut?

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...

Questions for Judy Shelton and gold standard supporters

President Trump has nominated Judy Shelton as one of the candidates for the open seats on the Federal Reserve's Board of Governors. While Shelton is a controversial nominee, she is less problematical than the previous two, Herman Cain and Stephen Moore. While I certainly understand the reasoning behind a gold-backed currency, which is a way...