The RecessionALERT Valuation Index (RAVI) is currently forecasting 30% growth for 2016 for the SP500 with its 1-year forecast model. “How the heck is this possible given current overvaluation of the market?” we can hear you say. Let us show you how this is calculated so we can put the forecast into context: Firstly, we […]
Bear market rules still in force
Our first bear market signal was issued on 1 September 2015 when the Composite Market Health Index (CMHI) dipped below zero. Since then we had a sustained deterioration of the CMHI components to reinforce the signal, coupled with high stock market volatility. Although market breadth features prominently in the CMHI, there is another way to […]
Risk of U.S Economic Recession
A raft of analysts, perma-bears and bloggers are playing fast and loose with the R-word again. This is likely to reach a crescendo with the release today of the unexpected large drop in the ISM non-manufacturing survey. We recall a time in late 2011 when the mainstream perception was that we were headed for recession […]
Yellen Labor Dashboard reaches target
“Full Employment” target reached Shortly after taking up office, Federal Reserve Chair Janet Yellen used her “jobs data dashboard” to justify the Fed’s easy money policies and to argue there’s still considerable slack in the labor market five years after the recession’s end. Seven of the nine gauges on this dashboard had not recovered to levels […]
Things that go bump in the night
The U.S economy appears unstoppable right now. Just about every leading and co-incident indicator you can think of is pointing to positive growth. Among the hundreds of indicators we follow for our models on a daily basis, we have discovered a few that are displaying worrying trends and flagging a future recession. It should be pointed […]
SP-500 Returns Forecast, 4Q2014
The RecessionALERT Valuation Index (RAVI) is a multifactor valuation model that examines cyclically adjusted trailing SP-500 earnings (various multi-decade horizons), the SP-500 total-return index level, total stock market capitalization, Gross Domestic Product, non-financial corporate equities and liabilities, non-financial corporate business net-worth and percentage of investors’ allocation to stocks versus cash and bonds to determine 10, […]
Stresses are building up in the system
Despite a steady rise in the SP-500 Index, clear and persistent financial stresses are starting to build up in the system. We construct a composite of the St. Louis Fed Financial Stress Index, the Cleveland Financial Stress Index, the Kansas City Financial Stress Index and the Chicago Fed National Financial Conditions Index as shown below: […]
Valuation estimate of SP500 2015 returns : 2,246 target
The RecessionALERT Valuation Index (RAVI) is a multifactor valuation model that examines cyclically adjusted trailing SP-500 earnings (various multi-decade horizons), the SP-500 total-return index level, total stock market capitalization, Gross Domestic Product, non-financial corporate equities and liabilities, non-financial corporate business net-worth and percentage of investors’ allocation to stocks versus cash and bonds to determine 10, 5, […]
Valuations not at nose-bleed levels yet
The recent run in the major U.S stock indices has resulted in Shiller-PE charts being trotted out showing how far we are off the historical mean, implying a nasty pullback is in the works. The problem with a historical mean is that it is a single horizontal value on a chart that fails to take […]
“Baby” correction belies verocity of breadth sell-off
The current stock market correction is diminutive in relative terms – hardly anything to sit up and take notice of. However an examination of underlying breadth deterioration reveals an astonishing plunge of the net new quarterly highs (the percentage of new quarterly highs less the percentage of new quarterly lows). This percentage has been languishing […]
New improvements
We have introduced three new improvements to the web site to enhance the user-experience; 1.Progress Loader Some of our pages, particularly the CHARTS page, can take some time to load due to the amount of historical data we allow you to view in the charts. If web site usage is heavy and/or the internet is very […]
Liquidity Crunch warning finally materialised
Fifteen trading days after our Average Liquidity Index (ALI) issued a liquidity crunch warning, the SP-500 finally succumbed into a decent sized correction. The two short-term liquidity indexes, one of which is described in “The HI-LO Breadth Indexes for the SP-500” issued warning even sooner, as can be seen below: At a level of -2, […]
SP-500 Liquidity Crunch Warning
Losses on the SP-500 on Friday 11th saw all our measures of breadth-liquidity fall into contraction, warning of a highly vulnerable market subject to further liquidity tightness and raised volatility. To many of my staff that actively trade the SP-500, this is treated as a bona fide correction warning. If you are scratching your heads […]
Yellen’s Labor Dashboard suggests tightening in 2016
Federal Reserve Chair Janet Yellen recently used her “jobs data dashboard” to justify the Fed’s easy money policies and to argue there’s still considerable slack in the labor market five years after the recession’s end. Seven of the nine gauges on this dashboard have not recovered to levels reached before the last recession, reinforcing her belief […]
U.S future economic outlook improves
The RecessionALERT monthly U.S Leading Growth Index (USMLI) is an index that attempts to capture future (6-9 months) U.S economic growth. The index has been constructed since 1960, but this report only displays data from 2000 onwards to capture the last two recessions. The USMLI consist of 10 sub-components that are in turn constructed from over […]
Seasonality approaching its worst point
We have entered the Mid-Term cycle in the Quadrennial Presidential Cycle, in which the months April through to September typically represent the worst SP-500 seasonal period for the entire 4 year cycle. The current cycle which commenced in 2012 has performed way above average so far, as shown below with the black dotted line: However […]
FED in the driving seat
The chart below shows how the FED is firmly in the driving seat for the U.S stock markets through the monthly growth of their balance sheet, primarily through the purchase of U.S Treasuries and Mortgage Backed Securities. You can clearly see why talk of tapering sends shudders down everyone’s spine: It is interesting to note […]
Labor Market flags U.S Recession on horizon
Labor data last week surprised to the upside and pointed to an improvement in hiring and by implication the labor market. However, our leading Labor Market Growth Index, which tracks various diversified aspects of the general U.S labor market, experienced a sharp drop for the data representing the end of October 2013, to below the […]
Things could get fun from here…
At last, a decent pullback with a fat red candle on the SP-500. If the premise (see “Seven Paw-prints of the Bear“) is that we are in a well established bull market (we don’t care if its liquidity or economically fueled) then this could become a desperately needed “buy on the dip” opportunity to get aboard […]
Once in a year opportunity
We have spend the better part of a decade in the search for the ultimate indicator for the stock markets. Whilst it became clear early on in this quest that no one indicator would work all the time and every time, there are a few that stand out from the rest. One of them is […]