Author: Colin Twiggs

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.
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US Market Snapshot

Bull-Bear Market Index
Stock Market Pricing Indicator

The gauge on the left indicates whether the market is in a bull or bear phase, and the indicator on the right reflects the current valuation of the stock market. Stock market pricing indicates whether stocks are cheap or expensive in relation to earnings, but it is a poor indicator of market timing. We do not recommend selling stocks because market valuations are high; however, we recommend exercising caution when adding new positions.

Bull/Bear Market

We have revised the bull-bear market leading indicator to improve its responsiveness, stripping it down to a composite of five key indicators. At present, two of the five indicators signal risk-off, indicating medium risk of a US bear market.

Bull/Bear Market Indicator

Cyclical Employment

Cyclical employment increased to 27.603 million in August from 27.550 million in July. A 300,000 decline from the September 2024 peak of 27.671 million would signal risk-off.

Cyclical Employment

Heavy Truck Sales

US heavy truck sales slowed to 36,500 units in August from 38,900 in July. The 12-month average ticked up to 33,000 from 32,800. However, it would need to reverse by 10% for the risk-off signal to reverse to risk-on.

Heavy Truck Sales (Units)

Heavy truck sales reflect the transportation industry's confidence in the economic outlook. A fall of more than 10% below the preceding peak signals risk-off, while a 10% rise above a trough indicates risk-on.

Stock Pricing

US stock pricing remains at extreme levels. We changed the composition of the Forward PE and Price-to-Sales indicators at the end of April 2026, so earlier highs are not directly comparable.

US Stock Market Value Indicator

We use z-scores to measure each indicator's current position relative to its historical data, with results expressed in standard deviations from the mean. We then average the five readings and convert that to a percentile. The higher the stock market price measure is relative to the historical mean, the greater the risk of a sharp drawdown.

The Dow Jones 30 Trimmed Mean of Forward PE fell to 20.53 from 21.88 last week, causing the composite stock pricing index to drop sharply to 96.08% from 97.94%.

Shiller CAPE

Robert Shiller's CAPE smoothes out business-cycle effects by comparing the S&P 500 index to a 10-year average of inflation-adjusted earnings.

The current advance on the CAPE ratio is the second-highest in history, behind only the 1999 peak during the Dotcom bubble at 44.2, with values far above their long-term average of 22.4.

Robert Shiller's S&P 500 CAPE Index

Conclusion

The Bull-Bear indicator suggests the US economy is slowing, but not yet in a recession.

Pricing is growing more extreme, increasing the risk of a significant drawdown.

Acknowledgments

Managing Risk

To find out more, go to Managing Risk on the top menu, or see:

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ASX Market Snapshot

Bull-Bear Market Leading Index
Stock Market Pricing Indicator

The gauge on the left indicates whether the market is in a bull or bear phase, while the one on the right reflects the current valuation of the stock market. Stock market pricing indicates whether stocks are cheap or expensive in relation to earnings, but it is a poor indicator of market timing. We do not recommend selling stocks when market valuations are high, but we advise caution when adding new positions.

Bull/Bear Market

The ASX Bull-Bear Leading Index signals a mild bear market.

ASX Bull/Bear Market Indicator

Australian leading indicators have a 40% weighting in the ASX Leading Index, China 20%, and the US Leading Index carries the remaining 40%.

Financial Sector

The ASX 200 Financials Index (XFJ) retreated from resistance at 10000, crossing below its 50-week weighted moving average. A breach of primary support at 9000 would signal risk-off. ASX 200 Financials Index

Housing Approvals

The 3-month moving average of private housing approvals is well above its 20-year moving average (dotted line below), indicating a strong uptrend in the Australian housing sector.

Australian Private Housing Approvals

A cross of 3-month MA values (navy) below the 20-year MA (red) would signal risk-off.

Stock Pricing

ASX stock pricing indicates that stocks are overvalued, but not as extreme as the US market.

ASX Stock Market Value Indicator

We use z-scores to measure each indicator's current position relative to its historical data, with results expressed in standard deviations from the mean. We then calculate an average of the five readings and convert that to a percentile. The higher stock market prices are relative to their historical mean, the greater the risk of a sharp drawdown.

Conclusion

The Bull-Bear indicator suggests that the Australian economy is slowing. Two Australian indicators — NAB Forward Orders and the ASX 200 Financial Index — are close to the threshold but do not yet signal risk-off. However, they keep us on bear alert.

Meanwhile, valuations remain high, increasing the risk of a drawdown.

Acknowledgments

Managing Risk

To find out more, go to Managing Risk on the top menu, or see:

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Shift from Growth to Value

Key Points

  • The Dow jumped 1.7% to a new high above 51500, outstripping the S&P 500, which gained 0.4%.
  • The Russell 1000 shows a shift from Growth to Value.
  • Bitcoin is testing primary support at 62000, signaling a market shift to risk-off.

The Dow jumped 1.7% to a new high above 51500, boosted by a strong shift to value stocks in the blue-chip index. Rising Trend Index troughs confirm buying pressure.

Dow Jones Industrial Average

The S&P 500 lagged, with a 0.4% gain, though it remains in a strong uptrend.

S&P 500

The recent rally in Growth stocks (IWF) relative to Value stocks (IWD) in the Russell 1000 threatens to reverse with a break of the rising trendline.

Russell 1000 Large Cap Value ETF (IWD) vs. Russell 1000 Large Cap Growth ETF (IWF)

A shift from Growth to Value would reinforce the Bitcoin1 risk-off signal below. A breach of primary support at 62,000 would signal another decline, reflecting market attempts to shed risk assets.

Bitcoin (BTC)

The war with Iran has also upended the Treasury market, with the 2-year Treasury yield jumping above 3.6% at the beginning of March, ending the primary downtrend. The reversal signals no more rate cuts, with the rally now exceeding the Fed funds target range of 3.5% to 3.75% as expectations for rate hikes grow.

2-Year Treasury Yield

The economy is at full employment, with job openings exceeding unemployment for the first time in 12 months.

Job Openings

Inflation is rising, with CPI likely to follow Brent crude higher.

CPI & Brent Crude

It would be unreasonable to expect the new Fed Chair to push for rate hikes at his first meeting, but we are likely to see a switch to a tightening bias.

Conclusion

The Dow is gaining on the S&P 500 as financial markets shift to a risk-off stance.

Kevin Warsh will chair his first FOMC meeting on June 16-17. 2-year Treasury yields indicate the bond market does not expect further rate cuts. The FOMC will likely switch to a tightening bias to calm market fears of rising inflation.

Acknowledgments

Notes

  1. Cryptocurrencies are the highest-risk asset class, and we analyze Bitcoin (BTC) solely to identify risk sentiment in financial markets. Our analysis is not a recommendation to buy or sell BTC, nor is it a commentary on the merits of cryptocurrency.
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Markets in Risk-Off Despite High Stock Prices

Key Points

  • Bitcoin tests support at 70,000, signaling risk-off.
  • Stocks continue their uptrend.
  • Consumers continue to spend, but the falling saving rate suggests they are under pressure.
  • Manufacturers are building inventories ahead of expected price rises and supply chain disruptions.

Bitcoin1 is testing support at 70,000. The steep downtrend warns that financial markets are increasingly risk-averse.

Bitcoin (BTC)

However, indices like the NASDAQ remain in a strong uptrend, with the Invesco QQQ ETF close to our target of 750.

Invesco Nasdaq 100 ETF (QQQ)

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US Market Snapshot

Bull-Bear Market Index
Stock Market Pricing Indicator

The gauge on the left indicates whether the market is in a bull or bear phase, and the indicator on the right reflects the current valuation of the stock market. Stock market pricing indicates whether stocks are cheap or expensive in relation to earnings, but it is a poor indicator of market timing. We do not recommend selling stocks because market valuations are high; however, we recommend exercising caution when adding new positions.

Bull/Bear Market

We have revised the bull-bear market leading indicator to improve its responsiveness, stripping it down to a composite of five key indicators. At present, two of the five indicators signal risk-off, indicating medium risk of a US bear market.

Bull/Bear Market Indicator

Stock Pricing

US stock pricing remains at extreme levels. We changed the composition of the Forward PE and Price-to-Sales indicators at the end of April 2026, so earlier highs are not directly comparable.

US Stock Market Value Indicator

We use z-scores to measure each indicator's current position relative to its historical data, with results expressed in standard deviations from the mean. We then average the five readings and convert that to a percentile. The higher the stock market price measure is relative to the historical mean, the greater the risk of a sharp drawdown.

The Dow Jones 30 Trimmed Mean of Forward PE fell to 20.53 from 21.88 last week, causing the composite stock pricing index to drop sharply to 96.08% from 97.94%.

Buffett Indicator

Warren Buffett's favorite long-term measure of stock market valuation provides a stable valuation ratio largely unaffected by fluctuating profit margins.

The ratio of stock market capitalization to GDP is more than double its long-term average of 1.2. Buffett considers values above 2.0 to indicate that stock prices are dangerously high.

Buffett Indicator: Stock Market Capitalization to GDP

Shiller CAPE

Robert Shiller's CAPE smoothes out business-cycle effects by comparing the S&P 500 index to a 10-year average of inflation-adjusted earnings.

The current advance on the CAPE ratio is the second-highest in history, behind only the 1999 peak during the Dotcom bubble at 44.2, with values far above their long-term average of 22.4.

Robert Shiller's S&P 500 CAPE Index

Conclusion

The Bull-Bear indicator suggests the US economy is slowing, but not yet in a recession.

Pricing is growing more extreme, however, increasing the risk of a significant drawdown.

Acknowledgments

Managing Risk

To find out more, go to Managing Risk on the top menu, or see:

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ASX Market Snapshot

Bull-Bear Market Leading Index
Stock Market Pricing Indicator

The gauge on the left indicates whether the market is in a bull or bear phase, while the one on the right reflects the current valuation of the stock market. Stock market pricing indicates whether stocks are cheap or expensive in relation to earnings, but it is a poor indicator of market timing. We do not recommend selling stocks when market valuations are high, but we advise caution when adding new positions.

Bull/Bear Market

The ASX Bull-Bear Leading Index signals a mild bear market.

ASX Bull/Bear Market Indicator

Australian leading indicators have a 40% weighting in the ASX Leading Index, China 20%, and the US Leading Index carries the remaining 40%.

Financial Sector

The ASX 200 Financials Index (XFJ) retreated from resistance at 10000, crossing below its 50-week weighted moving average. A breach of primary support at 9000 would signal risk-off. ASX 200 Financials Index

Stock Pricing

ASX stock pricing indicates that stocks are overvalued, but not as extreme as the US market.

ASX Stock Market Value Indicator

We use z-scores to measure each indicator's current position relative to its historical data, with results expressed in standard deviations from the mean. We then calculate an average of the five readings and convert that to a percentile. The higher stock market prices are relative to their historical mean, the greater the risk of a sharp drawdown.

Conclusion

The Bull-Bear indicator suggests that the Australian economy is slowing. Two Australian indicators are falling, and, while not yet signaling risk-off, they keep us on bear alert.

On the other hand, valuations remain high, increasing the risk of a drawdown.

Acknowledgments

Managing Risk

To find out more, go to Managing Risk on the top menu, or see:

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There is No Deal

Key Points

  • President Trump raised hopes that he is about to sign a deal with Iran that will allow shipping through the Strait of Hormuz.
  • Crude prices fell, along with long-term Treasury yields.
  • The US economy is slowing, with real GDP growth at an annualized rate of 1.6% in the first quarter.
  • Real personal income per capita declined for the third straight month.
  • Personal savings plunged, warning of a recession.

Brent crude is testing support at $90 per barrel on news of an “imminent deal” with Iran.

Brent Crude

Every time the 10-year Treasury yield reaches 4.5%, Axios runs a headline citing sources close to the President saying he is close to a deal. Crude oil futures plunge, but the deal never materializes.

WASHINGTON/CAIRO, May 28 (Reuters) – The United States and Iran reached ​an agreement on Thursday to extend their ceasefire and lift restrictions on shipping through the Strait of Hormuz, sources told Reuters, though U.S. President Donald Trump has yet to approve ‌it and Iranian state media said it had not been finalized.

According to four sources familiar with the matter, the agreement would extend the truce for another 60 days and allow traffic to flow through the strategic waterway while negotiators tackle difficult issues such as Iran’s nuclear program.

Trump has not yet approved the deal, the sources said. Iran has yet to comment on news of the proposed ​deal, which was first reported by Axios.

Ignore the BS and focus on the bottom line. There is no deal until an agreement is signed — and adhered to by all parties, including Bibi Netanyahu.

US Strategic Petroleum Reserves fell by another 9 million barrels in the week ending May 22.

EIA Strategic Petroleum Reserves (SPR)

If the Strait of Hormuz remains closed at the end of June, crude oil markets will panic over looming shortages.
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No Happy Ending

Key Points

  • US forces carried out what the Pentagon called “defensive” strikes on missile launch sites and minelaying boats in southern Iran on Monday.
  • Iran’s Revolutionary Guard retaliated with a drone attack on a US airbase on Thursday.
  • Brent crude rallies to $96.60 per barrel.
  • President Trump insists a deal is within reach.
  • Trump allies have voiced opposition to the proposed deal, which they say favors Iran.
  • Trump says he can outwait Iran and that Iranian leaders had miscalculated if they thought ‌the November midterm elections would force him into a deal.
  • Gold and silver fall as prospects for a peace deal fade.

DUBAI/WASHINGTON, May 28 (Reuters) – Iran’s Revolutionary Guard targeted a U.S. airbase on Thursday after the U.S. military carried out what a Washington official said were strikes on an Iranian drone operation near ‌the Strait of Hormuz….

The U.S. official, who requested anonymity to speak candidly about military operations, told Reuters the military shot down four Iranian attack drones and struck a ground control station ​in the port city of Bandar Abbas that was about to launch a fifth drone.

“These actions were measured, purely defensive and intended to maintain the ceasefire,” the official said.

The Islamic ​Revolutionary Guard Corps said it targeted a U.S. base in response to what it described as an early morning U.S. attack near Bandar Abbas airport, ⁠Tasnim news agency reported. The IRGC said it targeted the U.S. airbase from which the attack on the control station near Bandar Abbas was launched, without identifying the base.

Brent crude (July’26 futures) rallied to $96.60 on news of the air strikes.

Brent Crude Futures (ICE July'26)

Crude oil flows through the Strait of Hormuz remain at a trickle.

Oil Tanker Transits Through the Strait of Hormuz

For those hoping the end of the price surge is near, Sultan Al Jaber, the head of the Abu Dhabi National Oil Company (ADNOC), has disappointing news.

“Even if this conflict [with Iran] ends tomorrow,” he said today at an Atlantic Council event, “full flows will not return before the first or even second quarter of 2027.”

US Strategic Petroleum Reserves (SPR) are shrinking, falling from 415 million barrels to 374 million over the past 6 weeks.

Strategic Petroleum Reserves (SPR)

The emerging deal puts off many critical issues to be resolved later and has already exposed the Republican president to fierce criticism — even from some of his own supporters — that Iran’s hardline leaders will emerge from the conflict battered but emboldened. It all comes to a head just as the midterm elections to determine control of Congress come into focus and as Republicans worry that rising costs and fuel prices are darkening the American electorate’s mood.

But Trump on Wednesday dismissed the idea that the upcoming elections would shape his Iran strategy.

“They thought they were gonna outwait me. You know, ‘We’ll outwait him. He’s got the midterms,'” Trump said. “I don’t care about the midterms.”

….The president is also facing scrutiny from Republican allies, including Sens. Roger Wicker of Mississippi, Lindsey Graham of South Carolina and Ted Cruz of Texas, who have said the terms seem too favorable to Tehran.

They’re balking at aspects of the deal that have emerged publicly that they say too closely resemble the nuclear agreement reached with Iran by Democratic President Barack Obama, which Trump scrapped during his first term.(NPR)

Trump faces the risk that higher crude prices cause a similar inflation spike to the 2022 Russian invasion of Ukraine, resulting in a wipeout at the November midterms.

Brent Crude & CPI

Gold & Silver

Gold and silver face increased selling pressure as the sudden drop in oil export revenues forces Gulf States to liquidate reserves, including bullion. High oil prices have also forced Turkiye to enter into an $80 billion gold swap to cover higher import costs without crashing the already-weak Turkish Lira. Russia, for different reasons, is also liquidating gold reserves to help fund its war with Ukraine.

Gold broke support at $4,500 per ounce, signaling a likely test of support at $4,000.

Spot Gold

Silver has retraced similarly, and a break below $70 per barrel would signal another test of primary support at $60. Declining Trend Index peaks warn of continued selling pressure.

Spot Silver

Conclusion

The US war with Iran — and negotiations — will likely continue for months, if not years. Crude oil shortages and high prices are expected to cause an inflation spike ahead of the US midterm elections, resulting in a Republican wipeout in November.

We remain bullish on the long-term outlook for gold and silver, but their current weakness will likely persist until the Strait of Hormuz reopens and oil prices fall.

Acknowledgments

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Bipolar Disorder

Key Points

  • The University of Michigan Consumer Sentiment Index fell to a new record low since the series started in 1960.
  • The Dow Jones Industrial Average broke through resistance at 50,000, confirming a fresh bull market advance.

The University of Michigan Consumer Sentiment Index fell to a new low of 44.8.

University of Michigan: Consumer Sentiment

A plot of the 3-month moving average since 1960, when the Consumer Sentiment series started, shows that consumer sentiment is at a record low.

University of Michigan: Consumer Sentiment

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US Market Snapshot

Bull-Bear Market Index
Stock Market Pricing Indicator

The gauge on the left indicates whether the market is in a bull or bear phase, and the indicator on the right reflects the current valuation of the stock market. Stock market pricing indicates whether stocks are cheap or expensive in relation to earnings, but it is a poor indicator of market timing. We do not recommend selling stocks because market valuations are high; however, we recommend exercising caution when adding new positions.

Bull/Bear Market

We have revised the bull-bear market leading indicator to improve its responsiveness, stripping it down to a composite of five key indicators. At present, two of the five indicators signal risk-off, indicating medium risk of a US bear market.

Bull/Bear Market Indicator

Stock Pricing

US stock pricing remains at extreme levels. We changed the composition of the Forward PE and Price-to-Sales indicators at the end of April 2026, so earlier highs are not directly comparable.

US Stock Market Value Indicator

We use z-scores to measure each indicator's current position relative to its historical data, with results expressed in standard deviations from the mean. We then average the five readings and convert that to a percentile. The higher the stock market price measure is relative to the historical mean, the greater the risk of a sharp drawdown.

The Dow Jones 30 Trimmed Mean of Forward PE fell to 20.53 from 21.88 last week, causing the composite stock pricing index to drop sharply to 96.08% from 97.94%.

Buffett Indicator

Warren Buffett's favorite long-term measure of stock market valuation provides a stable valuation ratio largely unaffected by fluctuating profit margins.

The ratio of stock market capitalization to GDP is more than double its long-term average of 1.2. Buffett considers values above 2.0 to indicate that stock prices are dangerously high.

Buffett Indicator: Stock Market Capitalization to GDP

Dow Jones Industrials Price-to-Sales

We use a 20% trimmed mean of the Price-to-Sales ratio across the 30 stocks in the Dow to remove the most extreme readings that would otherwise distort the ratio.

A change in the Dow Jones index composition on June 29, 2026 may have contributed to the recent jump, when Alphabet Inc. (GOOGL) replaced Verizon (VZ) in the index.

Dow Jones Industrials Price-to-Sales Ratio

Shiller CAPE

Robert Shiller's CAPE smoothes out business-cycle effects by comparing the S&P 500 index to a 10-year average of inflation-adjusted earnings.

The current advance on the CAPE ratio is the second-highest in history, behind only the 1999 peak during the Dotcom bubble at 44.2, with values far above their long-term average of 22.4.

Robert Shiller's S&P 500 CAPE Index

Conclusion

The Bull-Bear indicator suggests the US economy is slowing, but is not yet in a recession.

Pricing is growing more extreme, however, increasing the risk of a significant drawdown.

Acknowledgments

Managing Risk

To find out more, go to Managing Risk on the top menu, or see:

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