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 remains at 60%, with two of five leading indicators signaling risk-off:
The unemployment rate remains at a low 4.2% in May, but weekly continued claims climbed to 1.945 million on June 7, warning that the labor market is deteriorating.
However, monetary conditions are easing. The Chicago Fed National Financial Conditions Index declined to -0.52 on June 13, signaling improved financial conditions.
Stock Pricing
Stock pricing eased slightly to 96.30, compared to a low of 95.04 nine 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 are in the early stages of a bear market, with the bull-bear indicator at 60%. Stock pricing is extreme, indicating risk of a significant drawdown.
Acknowledgments
- Prof. Robert Shiller: CAPE 10 Data
- 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
- 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 co-founded Incredible Charts and writes the popular Trading Diary and Patient Investor newsletters.
Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.
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.
He founded PVT Capital (AFSL No. 546090) in May 2023, which offers investment strategy and advice to wholesale clients.