GAGA indicator sending an important sell signal ? by Chris Kimble
GAGA Indicator (Google, Apple, General Electric & Amazon) are all breaking key support lines at the same time.
Three of the four stocks in the above 4-pack turned up before the 500 index did in 2009.
Now two of the three are breaking support off their 2009 lows, before the 500 index has.
Watch the GAGA indicator as it might send an early signal to how the 500 index will handle its rising support off its 2009 lows!
http://blog.kimblechartingsolutions.com ... ll-signal/
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Warning Signs 01 (Oct 08 - Feb 15)
Re: Warning Signs
by winston » Fri Nov 09, 2012 5:57 am
It's all about "how much you made when you were right" & "how little you lost when you were wrong"
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Re: Warning Signs
by winston » Wed Nov 14, 2012 7:49 am
The Four Horsemen Ride Again By Jack Sparrow
The vehicles that constitute “the four horsemen of the apocalypse” are as follows:
• US Treasuries
• US Dollar
• Gold
• $VIX Volatility Index
Why the four horsemen? Because when you see all four of these rise at the same time, the underlying message is very, very ominous.
Under normal circumstances, these market bellwethers are not correlated. The “horsemen” generally do not ride in the same direction. When gold is going up, the dollar and USTs are normally going down, or vice versa and so on.
When all rise together, however, it indicates an extreme correlation of “risk off” and diminished risk appetite across the board.
US treasuries rise via their designation as the ultimate deep liquidity safe haven instrument.
Gold rises as the “alternative currency” not subject to a printing press — the safe haven for those who fear USTs are booby-trapped.
The dollar rises as US investor capital is repatriated from emerging markets (and foreign investor capital flows into bonds).
And the VIX rises as equity risk assets are being shunned…
http://www.mercenarytrader.com/2012/11/ ... ide-again/
The vehicles that constitute “the four horsemen of the apocalypse” are as follows:
• US Treasuries
• US Dollar
• Gold
• $VIX Volatility Index
Why the four horsemen? Because when you see all four of these rise at the same time, the underlying message is very, very ominous.
Under normal circumstances, these market bellwethers are not correlated. The “horsemen” generally do not ride in the same direction. When gold is going up, the dollar and USTs are normally going down, or vice versa and so on.
When all rise together, however, it indicates an extreme correlation of “risk off” and diminished risk appetite across the board.
US treasuries rise via their designation as the ultimate deep liquidity safe haven instrument.
Gold rises as the “alternative currency” not subject to a printing press — the safe haven for those who fear USTs are booby-trapped.
The dollar rises as US investor capital is repatriated from emerging markets (and foreign investor capital flows into bonds).
And the VIX rises as equity risk assets are being shunned…
http://www.mercenarytrader.com/2012/11/ ... ide-again/
It's all about "how much you made when you were right" & "how little you lost when you were wrong"
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winston - Billionaire Boss
- Posts: 112711
- Joined: Wed May 07, 2008 9:28 am
Re: Warning Signs
by winston » Sat Jan 05, 2013 7:22 am
Above the Market’s Leading Investment Indicators
These indicators are designed to be a helpful tool to help shape an overall investment thesis and process as well as to separate short-term and long-term concerns, not to dictate trading decisions.
My conclusion then was that the market was not long-term cheap. I think they are worth re-visiting as we begin 2013.
1. PE10. The largest contributing factor to equity returns is the P/E ratio. The expansion or contraction of the broad market P/E ratio creates secular bull and bear markets. The chart below from Crestmont Research breaks down the components of total return for the S&P 500 for ten-year rolling periods.
Yale Professor Robert Shiller’s 10-year Average Inflation-Adjusted PE Ratio, also known as CAPE, Shiller PE or PE10, provides the best longer-term market gauge available. P
PE10 is the stock index price divided by the average real earnings from the previous 10 years – the time period is designed to smooth out near-term noise in the data. The basis for this approach is the finding that earnings valuation ratios provide predictive power for long-term stock market returns.
In January 1921, PE10 was 5.12, the lowest value of any January in the historical period. Meanwhile, PE10 in January 2000 was 43.77, the highest January level in history. It is 22.19 today, suggesting that stocks remain significantly overvalued.
2. DY10. The dividend-price ratio or dividend yield (DY) is another predictor of the subsequent 10-year real returns on stocks, although this approach has its problems. Historical S&P 500 DY is charted below and suggests that stocks are significantly overvalued today.
3. Tobin’s Q. The Tobin’s Q is the ratio of price to replacement cost, which is in many ways similar to book value.
The most current Q ratio can be calculated from September’s release of the Flow of Funds report for Q2 2011. It is calculated by dividing line 35 of table B.102 by line 32. The historical data is also available on the St. Louis FRED website. However, because the Flow of Funds report is released long after the quarter end, getting a relatively current level takes a bit of extrapolation.
When equity as a percentage of GNP is above-average then total real returns for U.S. equities have a high probability of being below average. When equity as a percentage of GNP is below-average then total real returns for U.S. equities have a high probability of being above-average.
Another use for Q is to determine the valuation of the whole market in ratio to the aggregate corporate assets. The Q ratio is a statistical measurement of the market’s value; fair value for Q is 0.65, primarily because capital stock is routinely overstated leading to a larger denominator in the Q equation.
Per Doug, the average (arithmetic mean) Q Ratio is about 0.70. The all-time Q Ratio high at the peak of the Tech Bubble was 1.78 — which suggests that the market price was 153 percent above the historic average of replacement cost. The all-time lows in 1921, 1932 and 1982 were around 0.30, which is about 57 percent below replacement cost.
Based on the latest Flow of Funds data, the Q Ratio at the end of the first quarter was 0.94, down slightly from 1.01 in October, 2011 and 0.96 in August, 2012. Doug’s current estimate puts the ratio about 34 percent above its arithmetic mean and 41 percent above its geometric mean.
These numbers are below the levels of overvaluation at the end March, which were 37 percent and 47 percent above the arithmetic and geometric means, respectively. By this measure, then, the market remains overvalued.
4. Market Cap to GDP. Market Capitalization to GDP has been described by Warren Buffet as “probably the best single measure of where valuations stand at any given moment.”
It compares the total price of all publicly traded companies to GDP. This metric can also be thought of as an economy wide price to sales ratio.
The data here is from the St. Louis FRED. However, because the data is quarterly, data for the other months have been entered using the prior ratio adjusted for the change in stock prices.
As charted below, this metric suggests that stocks are significantly overvalued and overvalued as compared to October, 2011 and August, 2012 (.96 and 1.01 to the current 1.03).
5. Bond Yields. Returns on bonds depend on the initial bond yield and on subsequent yield changes. Low bond yields tend to translate into lower returns because of less income and heightened interest-rate risk.
As Warren Buffett has pointed out (although he is not alone in this), “interest rates act as gravity behaves in the physical world. At all times, in all markets, in all parts of the world, the tiniest change in rates changes the value of every financial asset.
…If interest rates are, say, 13 percent, the present value of a dollar that you’re going to receive in the future from an investment is not nearly as high as the present value of a dollar if rates are 4 percent.”
As charted below, long-term interest rates have been generally declining for more than 30 years and remain near record low levels, suggesting that all assets are at risk going forward.
These measures all confirm that, from a longer-term perspective, the market remains overvalued and, if anything, somewhat more overvalued than it was when I last ran these numbers in August.
As I have been saying for a long time (for example, here, here and especially here) – we are (since 2000) in the throes of a secular bear market, subject to strong cyclical swings in either direction.
I continue to encourage investors to be skeptical, cautious, and defensive yet opportunistic. I suggest that they look to take advantage of the opportunities that present themselves while carefully managing and mitigating risk, which should remain their top priority.
http://rpseawright.wordpress.com/2013/0 ... icators-3/
These indicators are designed to be a helpful tool to help shape an overall investment thesis and process as well as to separate short-term and long-term concerns, not to dictate trading decisions.
My conclusion then was that the market was not long-term cheap. I think they are worth re-visiting as we begin 2013.
1. PE10. The largest contributing factor to equity returns is the P/E ratio. The expansion or contraction of the broad market P/E ratio creates secular bull and bear markets. The chart below from Crestmont Research breaks down the components of total return for the S&P 500 for ten-year rolling periods.
Yale Professor Robert Shiller’s 10-year Average Inflation-Adjusted PE Ratio, also known as CAPE, Shiller PE or PE10, provides the best longer-term market gauge available. P
PE10 is the stock index price divided by the average real earnings from the previous 10 years – the time period is designed to smooth out near-term noise in the data. The basis for this approach is the finding that earnings valuation ratios provide predictive power for long-term stock market returns.
In January 1921, PE10 was 5.12, the lowest value of any January in the historical period. Meanwhile, PE10 in January 2000 was 43.77, the highest January level in history. It is 22.19 today, suggesting that stocks remain significantly overvalued.
2. DY10. The dividend-price ratio or dividend yield (DY) is another predictor of the subsequent 10-year real returns on stocks, although this approach has its problems. Historical S&P 500 DY is charted below and suggests that stocks are significantly overvalued today.
3. Tobin’s Q. The Tobin’s Q is the ratio of price to replacement cost, which is in many ways similar to book value.
The most current Q ratio can be calculated from September’s release of the Flow of Funds report for Q2 2011. It is calculated by dividing line 35 of table B.102 by line 32. The historical data is also available on the St. Louis FRED website. However, because the Flow of Funds report is released long after the quarter end, getting a relatively current level takes a bit of extrapolation.
When equity as a percentage of GNP is above-average then total real returns for U.S. equities have a high probability of being below average. When equity as a percentage of GNP is below-average then total real returns for U.S. equities have a high probability of being above-average.
Another use for Q is to determine the valuation of the whole market in ratio to the aggregate corporate assets. The Q ratio is a statistical measurement of the market’s value; fair value for Q is 0.65, primarily because capital stock is routinely overstated leading to a larger denominator in the Q equation.
Per Doug, the average (arithmetic mean) Q Ratio is about 0.70. The all-time Q Ratio high at the peak of the Tech Bubble was 1.78 — which suggests that the market price was 153 percent above the historic average of replacement cost. The all-time lows in 1921, 1932 and 1982 were around 0.30, which is about 57 percent below replacement cost.
Based on the latest Flow of Funds data, the Q Ratio at the end of the first quarter was 0.94, down slightly from 1.01 in October, 2011 and 0.96 in August, 2012. Doug’s current estimate puts the ratio about 34 percent above its arithmetic mean and 41 percent above its geometric mean.
These numbers are below the levels of overvaluation at the end March, which were 37 percent and 47 percent above the arithmetic and geometric means, respectively. By this measure, then, the market remains overvalued.
4. Market Cap to GDP. Market Capitalization to GDP has been described by Warren Buffet as “probably the best single measure of where valuations stand at any given moment.”
It compares the total price of all publicly traded companies to GDP. This metric can also be thought of as an economy wide price to sales ratio.
The data here is from the St. Louis FRED. However, because the data is quarterly, data for the other months have been entered using the prior ratio adjusted for the change in stock prices.
As charted below, this metric suggests that stocks are significantly overvalued and overvalued as compared to October, 2011 and August, 2012 (.96 and 1.01 to the current 1.03).
5. Bond Yields. Returns on bonds depend on the initial bond yield and on subsequent yield changes. Low bond yields tend to translate into lower returns because of less income and heightened interest-rate risk.
As Warren Buffett has pointed out (although he is not alone in this), “interest rates act as gravity behaves in the physical world. At all times, in all markets, in all parts of the world, the tiniest change in rates changes the value of every financial asset.
…If interest rates are, say, 13 percent, the present value of a dollar that you’re going to receive in the future from an investment is not nearly as high as the present value of a dollar if rates are 4 percent.”
As charted below, long-term interest rates have been generally declining for more than 30 years and remain near record low levels, suggesting that all assets are at risk going forward.
These measures all confirm that, from a longer-term perspective, the market remains overvalued and, if anything, somewhat more overvalued than it was when I last ran these numbers in August.
As I have been saying for a long time (for example, here, here and especially here) – we are (since 2000) in the throes of a secular bear market, subject to strong cyclical swings in either direction.
I continue to encourage investors to be skeptical, cautious, and defensive yet opportunistic. I suggest that they look to take advantage of the opportunities that present themselves while carefully managing and mitigating risk, which should remain their top priority.
http://rpseawright.wordpress.com/2013/0 ... icators-3/
It's all about "how much you made when you were right" & "how little you lost when you were wrong"
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winston - Billionaire Boss
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- Joined: Wed May 07, 2008 9:28 am
Short-Selling & Buying Puts 02 (Feb 12 - Dec 13)
by winston » Sat Jan 12, 2013 8:58 am
Five Stock Market Charts Bears Have Been Waiting For By Ben Gersten
Five Stock Market Charts Suggesting a Downturn
■ Equity sentiment indicators are near a two-year high.
■ 86% of NYSE stocks are trading above 10-week MAs
■ Hedge funds' net long positions are now at the highest level since August 2011.
■ U.S. credit risk appetite at historic peak levels.
■ Speculative indicator position highest since 2007 Q3
http://moneymorning.com/2013/01/09/five ... iting-for/
Five Stock Market Charts Suggesting a Downturn
■ Equity sentiment indicators are near a two-year high.
■ 86% of NYSE stocks are trading above 10-week MAs
■ Hedge funds' net long positions are now at the highest level since August 2011.
■ U.S. credit risk appetite at historic peak levels.
■ Speculative indicator position highest since 2007 Q3
http://moneymorning.com/2013/01/09/five ... iting-for/
It's all about "how much you made when you were right" & "how little you lost when you were wrong"
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Re: Warning Signs
by winston » Fri Jan 25, 2013 7:32 am
5 reasons to remain cautious on U.S. equities
US equity markets are touching multi-year highs as investors increasingly allocate to the risk-on trade. But there are a few signals that may indicate some need for caution - at least in the short-term:
1. As discussed earlier (see post), consumer sentiment remains quite weak, which could easily create headwinds for corporate earnings.
2. Energy prices have been on the rise, with WTI crude oil at the highest level since September.
3. Regional manufacturing data isn't showing much improvement. The Richmond Fed index came in significantly below expectations.
What's particularly troubling about this index is that the component tracking manufacturing output prices declined while input prices rose. Not great for margins.
The Philadelphia Fed Survey and The Empire State Mfg Survey also both came in materially below expectations last week.
4. At the national level, activity remains subdued. The Chicago Fed National Activity Index today came in below analysts' forecasts. U.S. economic growth is still fairly weak.
5. From a technical perspective, the world all of a sudden turned bullish. According to Merrill Lynch, investor "cash allocations fell to the lowest level since February 2011" and "allocation to bonds fell to lowest level since May 2011".
We may not yet be at a level professionals would view as a contrarian signal, but this should certainly signal a need for caution.
http://soberlook.com/2013/01/5-reasons- ... on-us.html
US equity markets are touching multi-year highs as investors increasingly allocate to the risk-on trade. But there are a few signals that may indicate some need for caution - at least in the short-term:
1. As discussed earlier (see post), consumer sentiment remains quite weak, which could easily create headwinds for corporate earnings.
2. Energy prices have been on the rise, with WTI crude oil at the highest level since September.
3. Regional manufacturing data isn't showing much improvement. The Richmond Fed index came in significantly below expectations.
What's particularly troubling about this index is that the component tracking manufacturing output prices declined while input prices rose. Not great for margins.
The Philadelphia Fed Survey and The Empire State Mfg Survey also both came in materially below expectations last week.
4. At the national level, activity remains subdued. The Chicago Fed National Activity Index today came in below analysts' forecasts. U.S. economic growth is still fairly weak.
5. From a technical perspective, the world all of a sudden turned bullish. According to Merrill Lynch, investor "cash allocations fell to the lowest level since February 2011" and "allocation to bonds fell to lowest level since May 2011".
We may not yet be at a level professionals would view as a contrarian signal, but this should certainly signal a need for caution.
http://soberlook.com/2013/01/5-reasons- ... on-us.html
It's all about "how much you made when you were right" & "how little you lost when you were wrong"
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- Joined: Wed May 07, 2008 9:28 am
Re: Warning Signs
by winston » Tue Jan 29, 2013 6:35 am
Uh-Oh: NYT’s Front Page Cover Indicator By Barry Ritholtz
“Americans seem to be falling in love with stocks again.”
That is the first sentence of a front page NYTimes article, titled As Worries Ebb, Small Investors Propel Markets.
The rest of the article is just as bullish ...
I have been fairly selective as to what qualifies as a magazine cover indicator and what is merely media noise.
Let us look at the details of this one:
1) A mainstream non-business publication;
2) Front page or cover story
3) About rallying asset class
4) With a decidely bullish tone to it
That is how I determine when the magazine cover has been initiated. I cannot think of any reason why this one does not qualify.
This chart accompanied the article:
A Steady Ascent
Source: NYT
Previously:
• Uh-Oh: Time Magazine on Housing (June 6, 2005) BEARISH
• Uh-Oh: Facebook’s Zuckerberg is Time Man of the Year (December 17th, 2010) BEARISH
• Uh-Oh: Gold on the Cover of NYT Magazine? (May 15th, 2011) BEARISH
• NYT Sunday Business: Magazine Cover Indicator? (January 1, 2012) BULLISH
• Barron’s Cover: Don’t Lose My Money (January 28th, 2012) BULLISH
• Magazine Cover Indicator: New York “End of Wall Street” (February 6th, 2012) BULLISH
http://www.ritholtz.com/blog/2013/01/uh ... ront-page/
“Americans seem to be falling in love with stocks again.”
That is the first sentence of a front page NYTimes article, titled As Worries Ebb, Small Investors Propel Markets.
The rest of the article is just as bullish ...
I have been fairly selective as to what qualifies as a magazine cover indicator and what is merely media noise.
Let us look at the details of this one:
1) A mainstream non-business publication;
2) Front page or cover story
3) About rallying asset class
4) With a decidely bullish tone to it
That is how I determine when the magazine cover has been initiated. I cannot think of any reason why this one does not qualify.
This chart accompanied the article:
A Steady Ascent
Source: NYT
Previously:
• Uh-Oh: Time Magazine on Housing (June 6, 2005) BEARISH
• Uh-Oh: Facebook’s Zuckerberg is Time Man of the Year (December 17th, 2010) BEARISH
• Uh-Oh: Gold on the Cover of NYT Magazine? (May 15th, 2011) BEARISH
• NYT Sunday Business: Magazine Cover Indicator? (January 1, 2012) BULLISH
• Barron’s Cover: Don’t Lose My Money (January 28th, 2012) BULLISH
• Magazine Cover Indicator: New York “End of Wall Street” (February 6th, 2012) BULLISH
http://www.ritholtz.com/blog/2013/01/uh ... ront-page/
It's all about "how much you made when you were right" & "how little you lost when you were wrong"
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winston - Billionaire Boss
- Posts: 112711
- Joined: Wed May 07, 2008 9:28 am
Re: Warning Signs
by winston » Sun Feb 03, 2013 8:47 am
4 Things About This Rally That Terrify Me By James Brumley
The legs holding up the market's highs are a little shaky
On the surface, the stock market looks bulletproof right now. The S&P 500 rallied for eight straight days in mid-January (a feat not performed since 2004), and just when it looked like the party might be over after Monday’s modest dip, the bulls stepped up to the plate again Tuesday to carry the index to new multi-year highs.
What’s not to like?
Well, fellow traders, I’ve said it before and I’ll say it again: The time to get most worried about the market is when it seems like there’s nothing to worry about. That’s why I’m terrified now.
See, contrary to popular belief, there are a few things wrong with this rally that could come back to bite us sooner rather than later.
#1: Despite the Rally, Volume is Fading on the Way Up
Click to Enlarge Although trading volume has been drifting downward for years, it has continued to dwindle even over the past four weeks as stocks have continued to move higher. Though that condition can persist for a while, it’s not a prescription for longevity.
If this rally is to last, it eventually will need more and more buyers. Not fewer and fewer.
Earnings Have Technically Been ‘Good,’ But …
As of the end of last week, 148 of the 500 companies that make up the S&P 500 have reported last quarter’s earnings. Of them, 98 (66%) topped estimates, 30 (20%) missed estimates and 20 (14%) simply met estimates. That’s a little subpar.
More important, the S&P 500 is now on pace to earn $23.84 for Q4 of 2012. That’s only 0.4% higher than the year-ago figure, and well shy of the forecast profit of $26.87 that the pros were batting around just a couple of quarters ago. That sure beats Q3’s 5.1% dip in earnings, but aside from that quarter, it’s the weakest year-over-year growth the market has seen since 2009.
Sure, analysts are expecting to see earnings grow by 15% in 2013. Just bear in mind these are the same analysts that were at one point looking for a growth rate of more than 19% for last quarter. We’re nowhere even close to that.
Point being, earnings need to improve — dramatically — to keep this rally going.
Key Bellwethers Are Frighteningly Overextended
To give credit where it’s due, Google (NASDAQ:GOOG) was one of the companies that posted meaningfully solid results last quarter. But its stock is up 33% since last June, with a big piece of that move unfurling just since mid-November. Strong results or not, that’s just a lot of temptation for the would-be profit-takers.
It’s not just Google that looks and feels overbought, though. Gilead Sciences (NASDAQ:GILD) is up 64% over the past year. FedEx (NYSE:FDX) has gained 11% in less than a month. Lowe’s (NYSE:LOW) — a building supply company that has inexplicably been unable to participate in the rebound from the construction industry — has gained 35% in just five months, hitting new all-time highs in the process.
Visa (NYSE:V) also has reached new multiyear highs recently after running up 54% gains in the past 52 weeks. Yes, Visa has backed that stock performance up with impressive earnings growth, but like so many other major names, Visa has just moved too far, and too fast, to not expect the weight of those gains to start bearing down.
Psychology
I saved the best reason to be scared for last: the psychological impact of just getting close to the S&P 500’s prior peak (in October 2007) at 1,576.09. We’re about 72 points away from that level right now.
All the trading theories say “buy new highs.” All the fundamental theories say “earnings matter — charts don’t.” I respectfully disagree. If everyone always bought new highs, stocks would never fall back. If earnings mattered, the S&P 500’s P/E ratio wouldn’t have ranged anywhere from 12 to 20 over the past decade.
Reality: Like it or not, and rational or not, investors freak out and make panicked decisions when stocks revisit previous critical levels. It might be the case that most traders are mentally — maybe even subconsciously — ready to hit the sell button right when that peak is revisited. In fact, I’m reminded of the fact that the 2007 peak for the S&P 500 was also within 25 points (within 1.5%) of the March 2000 peak. Coincidence? Maybe.
Or maybe the market just had it in its head that stocks were about as high as they were able to go, which led to a self-fulfilling prophecy.
Bottom Line
I know it’s an unpopular opinion, but I’ve been an investor as well as an impartial observer of the market for more years than I care to admit now, and I’ve seen this kind of thing before.
When things look too good to be true, odds are the rug is about to get pulled out from underneath us — if only a little bit. Never say never.
http://investorplace.com/2013/01/4-thin ... en=3879240
The legs holding up the market's highs are a little shaky
On the surface, the stock market looks bulletproof right now. The S&P 500 rallied for eight straight days in mid-January (a feat not performed since 2004), and just when it looked like the party might be over after Monday’s modest dip, the bulls stepped up to the plate again Tuesday to carry the index to new multi-year highs.
What’s not to like?
Well, fellow traders, I’ve said it before and I’ll say it again: The time to get most worried about the market is when it seems like there’s nothing to worry about. That’s why I’m terrified now.
See, contrary to popular belief, there are a few things wrong with this rally that could come back to bite us sooner rather than later.
#1: Despite the Rally, Volume is Fading on the Way Up
Click to Enlarge Although trading volume has been drifting downward for years, it has continued to dwindle even over the past four weeks as stocks have continued to move higher. Though that condition can persist for a while, it’s not a prescription for longevity.
If this rally is to last, it eventually will need more and more buyers. Not fewer and fewer.
Earnings Have Technically Been ‘Good,’ But …
As of the end of last week, 148 of the 500 companies that make up the S&P 500 have reported last quarter’s earnings. Of them, 98 (66%) topped estimates, 30 (20%) missed estimates and 20 (14%) simply met estimates. That’s a little subpar.
More important, the S&P 500 is now on pace to earn $23.84 for Q4 of 2012. That’s only 0.4% higher than the year-ago figure, and well shy of the forecast profit of $26.87 that the pros were batting around just a couple of quarters ago. That sure beats Q3’s 5.1% dip in earnings, but aside from that quarter, it’s the weakest year-over-year growth the market has seen since 2009.
Sure, analysts are expecting to see earnings grow by 15% in 2013. Just bear in mind these are the same analysts that were at one point looking for a growth rate of more than 19% for last quarter. We’re nowhere even close to that.
Point being, earnings need to improve — dramatically — to keep this rally going.
Key Bellwethers Are Frighteningly Overextended
To give credit where it’s due, Google (NASDAQ:GOOG) was one of the companies that posted meaningfully solid results last quarter. But its stock is up 33% since last June, with a big piece of that move unfurling just since mid-November. Strong results or not, that’s just a lot of temptation for the would-be profit-takers.
It’s not just Google that looks and feels overbought, though. Gilead Sciences (NASDAQ:GILD) is up 64% over the past year. FedEx (NYSE:FDX) has gained 11% in less than a month. Lowe’s (NYSE:LOW) — a building supply company that has inexplicably been unable to participate in the rebound from the construction industry — has gained 35% in just five months, hitting new all-time highs in the process.
Visa (NYSE:V) also has reached new multiyear highs recently after running up 54% gains in the past 52 weeks. Yes, Visa has backed that stock performance up with impressive earnings growth, but like so many other major names, Visa has just moved too far, and too fast, to not expect the weight of those gains to start bearing down.
Psychology
I saved the best reason to be scared for last: the psychological impact of just getting close to the S&P 500’s prior peak (in October 2007) at 1,576.09. We’re about 72 points away from that level right now.
All the trading theories say “buy new highs.” All the fundamental theories say “earnings matter — charts don’t.” I respectfully disagree. If everyone always bought new highs, stocks would never fall back. If earnings mattered, the S&P 500’s P/E ratio wouldn’t have ranged anywhere from 12 to 20 over the past decade.
Reality: Like it or not, and rational or not, investors freak out and make panicked decisions when stocks revisit previous critical levels. It might be the case that most traders are mentally — maybe even subconsciously — ready to hit the sell button right when that peak is revisited. In fact, I’m reminded of the fact that the 2007 peak for the S&P 500 was also within 25 points (within 1.5%) of the March 2000 peak. Coincidence? Maybe.
Or maybe the market just had it in its head that stocks were about as high as they were able to go, which led to a self-fulfilling prophecy.
Bottom Line
I know it’s an unpopular opinion, but I’ve been an investor as well as an impartial observer of the market for more years than I care to admit now, and I’ve seen this kind of thing before.
When things look too good to be true, odds are the rug is about to get pulled out from underneath us — if only a little bit. Never say never.
http://investorplace.com/2013/01/4-thin ... en=3879240
It's all about "how much you made when you were right" & "how little you lost when you were wrong"
-
winston - Billionaire Boss
- Posts: 112711
- Joined: Wed May 07, 2008 9:28 am
Re: Warning Signs
by winston » Wed Feb 06, 2013 6:15 am
Extreme Sentiment: Barron's Cover "Get Ready for Record Dow - We Told You So"; Top Call
Looking for extreme sentiment?
Look no further than the cover of Barron's magazine
http://globaleconomicanalysis.blogspot. ... r-get.html
Looking for extreme sentiment?
Look no further than the cover of Barron's magazine
Top Call
Supposedly we are only in "the first inning" of a rally. Hmm. Are stocks supposed to rise 900% more?
This may not be "the top" but it's close enough for me. I'm calling it.
http://globaleconomicanalysis.blogspot. ... r-get.html
It's all about "how much you made when you were right" & "how little you lost when you were wrong"
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winston - Billionaire Boss
- Posts: 112711
- Joined: Wed May 07, 2008 9:28 am
Re: Warning Signs
by winston » Tue Feb 12, 2013 9:31 pm
Why You Should Listen to My Mother By Jeff Clark
They say nobody rings a bell at the top of the market. But sometimes… Mom calls.
My mother is the epitome of the public investor – which makes her an outstanding contrary indicator.
She doesn't pay particularly close attention to the financial markets. Sure, she listens to the news, and she can tell you if stocks in general are trending higher or lower. But she's not exactly glued to CNBC all day, focused on every blip on the financial radar screen.
So when mom decides it's time to buy or sell stocks (or gold, or oil, or cattle futures), it's because the idea has gone "mainstream." Her hairdresser is talking about it. The ladies in her bridge club are discussing it. The topic has probably come up at her church choir practice.
And whatever she wants to do is usually a bad idea.
Mom called me up yesterday, looking to buy stocks. So it's probably a good time to start selling.
I introduced the "Mother Indicator" to Growth Stock Wire readers in 2006. The last time Mom was bullish on stocks was two years ago. And market conditions were eerily similar to what we have today…
Back then, investor sentiment was off-the-charts bullish. Newsletter writers were pounding their keyboards encouraging readers to buy stocks. Bullish percent indexes were in extreme overbought territory. Summation indexes were high and were just starting to roll over. More than 90% of stocks in the S&P 500 were trading above their 50-day moving averages.
Then… Mom called and wanted to buy stocks. The market fell 7% over the next five weeks.
Signals from the Mother Indicator don't occur often – once every year or two. But they're remarkably accurate. And they always seem to occur within days of important turning points.
For example, I first acted on the Mother Indicator back in February 1994. Stocks had been on a terrific run, up 20% in about eight months. The Fed was easing, so interest rates on CDs and money market funds had been falling. Mom was looking to get a bit more bang for her buck. And for the first time since August 1987, she wanted to buy stocks.
Eight weeks later, the S&P 500 was down 8.5%.
We may not have seen the high point for this rally phase of the stock market just yet… But we're close. All sorts of technical indicators are waving the caution flags. And now, Mom is looking to buy stocks.
Now is the time to be careful. If history is any guide, it's about to get rough out there.
Source: www.growthstockwire.com
They say nobody rings a bell at the top of the market. But sometimes… Mom calls.
My mother is the epitome of the public investor – which makes her an outstanding contrary indicator.
She doesn't pay particularly close attention to the financial markets. Sure, she listens to the news, and she can tell you if stocks in general are trending higher or lower. But she's not exactly glued to CNBC all day, focused on every blip on the financial radar screen.
So when mom decides it's time to buy or sell stocks (or gold, or oil, or cattle futures), it's because the idea has gone "mainstream." Her hairdresser is talking about it. The ladies in her bridge club are discussing it. The topic has probably come up at her church choir practice.
And whatever she wants to do is usually a bad idea.
Mom called me up yesterday, looking to buy stocks. So it's probably a good time to start selling.
I introduced the "Mother Indicator" to Growth Stock Wire readers in 2006. The last time Mom was bullish on stocks was two years ago. And market conditions were eerily similar to what we have today…
Back then, investor sentiment was off-the-charts bullish. Newsletter writers were pounding their keyboards encouraging readers to buy stocks. Bullish percent indexes were in extreme overbought territory. Summation indexes were high and were just starting to roll over. More than 90% of stocks in the S&P 500 were trading above their 50-day moving averages.
Then… Mom called and wanted to buy stocks. The market fell 7% over the next five weeks.
Signals from the Mother Indicator don't occur often – once every year or two. But they're remarkably accurate. And they always seem to occur within days of important turning points.
For example, I first acted on the Mother Indicator back in February 1994. Stocks had been on a terrific run, up 20% in about eight months. The Fed was easing, so interest rates on CDs and money market funds had been falling. Mom was looking to get a bit more bang for her buck. And for the first time since August 1987, she wanted to buy stocks.
Eight weeks later, the S&P 500 was down 8.5%.
We may not have seen the high point for this rally phase of the stock market just yet… But we're close. All sorts of technical indicators are waving the caution flags. And now, Mom is looking to buy stocks.
Now is the time to be careful. If history is any guide, it's about to get rough out there.
Source: www.growthstockwire.com
It's all about "how much you made when you were right" & "how little you lost when you were wrong"
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winston - Billionaire Boss
- Posts: 112711
- Joined: Wed May 07, 2008 9:28 am
Re: Warning Signs
by winston » Sat Feb 23, 2013 6:19 am
Take some chips off the table
I wrote that I had been watching the behavior of cyclical stocks for a signal that a correction may be starting (see Correction? Watch the cyclicals!) and we may have seen that signal yesterday.
http://humblestudentofthemarkets.blogsp ... table.html
I wrote that I had been watching the behavior of cyclical stocks for a signal that a correction may be starting (see Correction? Watch the cyclicals!) and we may have seen that signal yesterday.
http://humblestudentofthemarkets.blogsp ... table.html
It's all about "how much you made when you were right" & "how little you lost when you were wrong"
-
winston - Billionaire Boss
- Posts: 112711
- Joined: Wed May 07, 2008 9:28 am
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