The gauge on the left indicates bull or bear market status, while the right reflects stock market drawdown risk.
Bull/Bear Market
Our Bull/Bear Market indicator remained at 60% this week, with two of five leading indicators signaling risk-off:
30-Week Smoothed Momentum is approaching zero on the S&P 500. A cross to below zero would complete another composite bear signal.
Stock Pricing
Stock pricing eased to 96.05, compared to 95.04 five weeks ago and a high of 97.79 percent in February. The extreme reading warns that stocks are at risk of a significant drawdown.
Conclusion
We remain in the early stages of a bear market, with the bull-bear indicator at 60%. Stock pricing is extreme, with elevated risk of a significant drawdown.
Acknowledgments
- Multpl.com: Shiller PE Ratio
- S&P Global: S&P 500 Sales and Earnings Estimates
- University of Michigan: Survey of Consumers
- Federal Reserve of St Louis: FRED Data
- Bureau for Economic Analysis: Motor Vehicles Data
Notes
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- See Managing Risk to learn more.
- See Bull-Bear and Stock Valuation for more on our composite market indicators.
Colin Twiggs is a former investment banker with almost 40 years of experience in financial markets. He founded PVT Capital (AFSL number 546090), which provides income and growth strategies to wholesale clients.
Colin also co-founded Incredible Charts and writes the popular Patient Investor newsletter.
Using a top-down approach, Colin identifies macro trends in the global economy and then combines fundamental and technical analysis to evaluate opportunities in sectors that stand to benefit.
Focusing on interest rates and financial market liquidity as primary drivers of the economic cycle, he warned of the 2008/2009 and 2020 bear markets well ahead of actual events.