There’s nothing to be bearish about regarding the stock market these days. I’ve reviewed my 9 point “Bear Market Checklist” of indicators and it is a perfect 0-for-9. Not even one indicator on the list is even close to flashing a warning sign so pop a pill and relax. There’s no immediate danger threatening stocks.
So writes Lou Basenese (www.wallstreetdaily.com) in edited excerpts from his original article* as posted on his site under the title The Most Nagging Question About Stocks.
This post is presented by Lorimer Wilson, editor of www.munKNEE.com and the FREE Intelligence Report newsletter (see sample here) and may have been edited ([ ]), abridged (…) and/or reformatted (some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. This paragraph must be included in any article re-posting to avoid copyright infringement.
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Basenese goes on to say in further edited excerpts:[The first 4 indicators are in Part 1 of this article entitled Pop a Pill & Relax ! There’s NO Immediate Danger Threatening Stocks. Below are the remaining 5 indicators:]
~Bear Market Warning Sign #5: A Peak in New 52-Week Highs
Bull markets can’t keep rising on the backs of a few stocks. To the contrary, the rally must be broad-based – have “breadth” as Wall Street pros like to say – and we can easily measure the rally’s breadth by monitoring the number of new 52-week highs.
An early warning sign that a run-up might be losing steam is a declining number of stocks hitting new 52-week highs…Ned Davis Research found that the average bull market ends 30 weeks after the number of new 52-week highs tops out….[and that just happened this past Wednesday when,] an astounding 37.2% of stocks in the S&P 500… hit new 52-week highs [source: Bespoke Investment Group]. Therefore, based on the averages, even if that reading ends up being the tippy top, this bull market could endure until December 11, 2013.
~Bear Market Warning Sign #6: Cash Crunch
For stocks to keep hitting new highs, investors need to keep buying more shares, and that takes cash but, unlike the government which can simply print more money as needed, individuals can’t. [Therefore,] by monitoring cash balances on the sidelines, we can determine if there’s any fuel left to propel share prices higher – once investors find themselves in the buying mood.
Again, there’s nothing to worry about right now. Although…investors are rotating out of money market funds into stocks, there’s still plenty more cash to go around.
Any way you look at it, there’s more than enough cash to keep fueling this rally.
~Bear Market Warning Sign #7: Get Shorty!
The “smart money” has a pretty good track record of increasing their short bets ahead of stock market declines. Therefore, if we’re so overdue for a correction, we should see short interest creeping higher – but that’s not happening…They remain completely noncommittal [with] the short interest as a percentage of float for the S&P 1500 Index…at a measly 5.7%…[which] is almost exactly where it stood one month ago…yet the S&P 500 Index has rallied another 5% since that time.
~Bear Market Warning Sign #8: Runaway Valuations
Bull markets give way to bear markets when valuations get overstretched…Prior to the dot-com collapse and the Great Recession, the price-to-earnings (P/E) ratio for the S&P 500 Index reached almost 30…[but] today it stands a tad over 16. We’re nowhere close to the danger zone, not to mention, we’re looking good on a forward P/E ratio basis, too.
As of May 10, the forward P/E ratio stood at 14.2, which is only slightly above the 10-year average of 14.1, according to FactSet.
~Bear Market Warning Sign #9: Stocks Can Only Go Up
The time to be wary of a stock market collapse comes when everyone (and their mom) gets bullish and starts buying stocks…[but] that’s not now…We’re nowhere close to a Great Rotation into stocks. There’s no one running around saying that “stocks can only go up” – like they did about real estate not too long ago.
The data backs me up, too…The most recent sentiment readings from the American Association of Individual Investors (AAII), for instance, checked in at 38.5%, compared to an average reading of 38.8% since 1987. Thet’re not even close to being out of whack and the latest bearish sentiment reading clocked in at 29.3%, which is right in line with its long-term average of 30.6%.
Then there’s the STALSTOX Index, which measures the average recommended allocation for stocks by U.S. chief strategists. It’s not overwhelmingly bullish, either. Currently, it rests at 49.2%, down from 61% at the start of 2012.
If you’re prone to worry, I suggest you keep this checklist handy. It’s a much more reliable way of pinpointing exactly when this bull market is losing steam.
Ahead of the tape,
(Editor’s Note: The author’s views and conclusions in the above article are unaltered and no personal comments have been included to maintain the integrity of the original post. Furthermore, the views, conclusions and any recommendations offered in this article are not to be construed as an endorsement of such by the editor.)
*http://www.wallstreetdaily.com/2013/05/17/bear-market-indicators-2/ (© 2013 Wall Street Daily, LLC. All rights reserved.)
Related Articles for a Balanced View:
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1. Pop a Pill & Relax ! There’s NO Immediate Danger Threatening Stocks
Right now there’s nothing to be bearish about. I say that with conviction, because my “Bear Market Checklist” is a perfect 0-for-9. Heck, not a single indicator on the list is even close to flashing a warning sign. We’ve got nothing but big whiffers! Take a look. Pop a pill and relax. There’s no immediate danger threatening stocks. Read More »
2. Latest Action Suggests Stock Market Beginning a New Long-term Bull Market – Here’s Why
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3. Sorry Bears – The Facts Show That the U.S. Recovery Is Legit – Here’s Why
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4. Stocks Are NOT In Another Bubble – Here’s Why
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5. Research Says Stock Market Bull Should Continue Its Run Until…
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6. These 4 Indicators Say “No Stock Market Correction Coming – Yet”
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7. Can Photos of 35 Swimsuit Models Be Wrong? Lastest “Swimsuit Issue Indicator” Suggests An UP Year for S&P 500!
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8. Bull Market in Stocks Isn’t About to End Anytime Soon! Here’s Why
As we all know, money printing always leads to inflation. It’s just a matter of figuring out which assets get inflated. This time around gold is not the only beneficiary, stocks are, too, and I’m convinced that the chart below holds the key to the end of the bull market. Words: 475; Charts: 1
9. QE Could Drive S&P 500 UP 25% in 2013 & UP Another 28% in 2014 – Here’s Why
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10. 5 Reasons To Be Positive On Equities
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11. Start Investing In Equities – Your Future Self May Thank You. Here’s Why
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12. Investors, Get Fully Invested! S&P 500 On Verge of Entering Euphoria Stage of Cyclical Bull Market
B. Pessimistic Views of the Market
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Despite bulls’ assertions otherwise, the stock markets are not cheap today. They are quite expensive and very overbought, ripe for a serious selloff. The S&P 500 stock index now has average valuations matching the ones seen in October 2007 when the last cyclical bull topped. Valuations should be around 12x or 13x now, 13 years into this 17-year secular bear. … Read More
2. Stock Market Will Crash Within 2 Months! Here’s Why
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3. S&P 500′s PEG Ratio Suggests Overvaluation & Coming Correction
The S&P 500 index is trading at record high levels and optimism remains high with Barron’s professional money manager survey indicating a record 74% money managers being bullish on markets even at current levels. [When one] measures valuations with respect to expected growth, [however, the ensuing ratio, the PEG ratio,] suggests overvaluation at these levels. [Let me explain further.] Words: 254; Charts: 1 Read More »
4. Can S&P 500 Justify Current Level With Earnings Growth So Weak?
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5. Stock Market Crash Coming, Then More QE & Then Commodity Price Spikes
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6. Don’t Get Greedy! The Greedometer Gauge Has a 100% Track Record – Here’s Its Most Recent S&P 500 Forecast
In the 7 years that the Greedometer has been used there have been zero missed calls, and zero false alarms. The 7th warning began in January and in late February,the Greedometer gauge reached an epic 7900rpm which is marginally higher than the 7700rpm maximum reading seen 3 months prior to the S&P500 peak in October 2007. [This article outlines the development and successes of the Greedometer and the new Mini Greedometer and what they are predicting for the stock market in 2013.] Words: 1420
7. It’s Time to Apply the “Greater Fool Theory” and Sell Your Winners to All Those Fools
The Dow has surpassed its all-time record high – set in October 2007 – and the S&P 500 is not far behind? Is this the early stage of another great bull market? Let’s look back at the two previous times when the S&P 500 set new all-time highs and see if we can learn something. Wait…first put your “this time it’s different” glasses on. OK, let’s go. Words: 430; Charts: 1
8. Don’t Ignore This Fact: “Greedometer Gauge” Signals S&P 500 Drop to the 500s by July-August, 2013!
The S&P500 is likely to achieve a secular (long term) peak this month, then drop to the 500s by July-August 2013. This article explains why. Words: 180
9. This Metric Strongly Suggests a Major Correction in the S&P 500 Could Be Coming
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10. Dr. Nu Yu: Formation of S&P 500′s “Three Peaks & a Domed House” Pattern On Course
The S&P 500 is on its way to building a “Domed House” and to challenge multi-year highs, or even all-time highs, in the process. Based on the forecast of my proprietary Long Wave Index, the broad market should be in a short-term bullish time-window until March 21st/13 by which time the “roof” phase of the formation should be complete with the S&P 500 having reached a projected peak of 1570. Words: 634; Charts: 4
11. I’m “making the call” for a market correction of 50% – or more!!
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12. Watch Out For Falling Stocks! Here’s Why
The stock markets make no sense. They have literally lost touch with reality. Divergences between fundamentals, confidence and the valuation of markets are large [and, as such,] cannot last for long….The only question is how…and how quickly….this correction occurs. Words: 261
13. You Need to Stay in the Stock Market Despite an Impending Economic Collapse – Here’s Why
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14. You Can Insure Your Portfolio From Potential Capital Loss – Here’s How
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16. Stop! Don’t Forget Market Risk – Remember What Happened in 2000 & 2007/8.
Investors are more bullish now than at any time since 2002 but the current rally has not been fueled by improved prospects of actual growth and wealth creation. Instead, it’s mostly due to:
- investors desperate for income denied them elsewhere by central bank policies;
- printed stimulus cash seeking a home and
- sheer technical momentum
but nowhere do they seem to be considering market risk – the risk that your investment will lose value because it gets dragged down in a falling market. Words: 615
17. Insider Trading Suggests That a Market Crash Is Coming
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18. This False Stock Market Bubble Will Burst, Major Banks Will Fail & the Financial System Will Implode! Here’s Why
At some point we are going to see another wave of panic hit the financial markets like we saw back in 2008. The false stock market bubble will burst, major banks will fail and the financial system will implode. It could unfold something like this: Words: 660
19. Ignore Wall Street Cheerleaders: Market Technicals, Fundamentals & Other Info Says Otherwise![In spite of what] the typical Wall Street cheerleaders, I mean strategists, are predicting, we see the equity market ever more closer to its cyclical top, miners about to retest a major bottom and hard assets with a new catalyst. [This article analyzes 9 pieces of information, complete with charts, that show what is actually going on in the marketplace at this point in time and what the short-term future holds.] Words: 930; Charts: 8
20. 5 Sound Reasons Investors Would Be Better Off On the Sidelines Than In the Market
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21. These Charts Suggest a Possible +/-60% Decline in the S&P 500 by 2014
J.P. Morgan Asset Management has developed a chart showing the past two cycles in the S&P 500 highlighting peak and trough valuations. At face value it is very alarming as it suggests a potential decline of somewhere in the vicinity of 60% over the next year or two and concurs with previous innovative trend analyses included in this article. Charts: 4
I still think we are seeing a “full court press” on PM’s by the Central Banks who are using all their fiscal power to push the PM market lower, while at the same time acquiring PM for themselves.
The key indicator for me is the availability of PM’s, when dealers are awash in PM’s then I will believe that the “value” of PM’s has really dropped, until then we are just seeing PM’s being “PLAYED”.