Tag: Bull-Bear Market Indicator

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US Market Leading Indicators

Bull/Bear Market Indicator
Stock Market Pricing Indicator

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:

Bull-Bear Market Indicator

The National Financial Conditions Index from the Chicago Fed dipped to -0.606, signaling monetary easing.

Chicago Fed National Financial Conditions Index

However, outside of the 2022 COVID pandemic, the University of Michigan index of current economic conditions is at the lowest recorded level since its inception in 1960.

University of Michigan: Current Economic Conditions

Also, continued unemployment claims rose to 1.92 million on May 17, a 39% increase in the four-week moving average from its low in June 2022. However, the unemployment rate remains at 4.2% and does not warrant serious concern until it reaches 5.0%.

Continued Claims & Unemployment Rate

Stock Pricing

Stock pricing increased to 96.51, compared to 95.04 six weeks ago and a high of 97.79 percent in February. The extreme reading warns that stocks are at risk of a significant drawdown.

Stock Market Value Indicator

We use z-scores to measure each indicator’s current position relative to its history, with the result expressed in standard deviations from the mean. We then calculate an average for the five readings and convert that to a percentile. The higher that stock market pricing is relative to its historical mean, the greater the risk of a sharp 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

Notes

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US Market Leading Indicators

Bull/Bear Market Indicator
Stock Market Pricing Indicator

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:

Bull-Bear Market Indicator

30-Week Smoothed Momentum is approaching zero on the S&P 500. A cross to below zero would complete another composite bear signal.

S&P 500 Twiggs Smoothed Momentum 30-Week

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.

Stock Market Value Indicator

We use z-scores to measure each indicator’s current position relative to its history, with the result expressed in standard deviations from the mean. We then calculate an average for the five readings and convert that to a percentile. The higher that stock market pricing is relative to its historical mean, the greater the risk of a sharp 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

Notes

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US Weekly Leading Indicators

Bull/Bear Market Indicator
Stock Market Pricing Indicator

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 the five leading indicators signaling risk-off:

Bull-Bear Market Indicator

The University of Michigan consumer survey of current economic conditions recorded the second lowest reading since its start in 1960. The lowest was in the aftermath of the pandemic, in June 2022.

University of Michigan: Current Economic Conditions

Stock Pricing

Stock pricing rallied to 96.59, compared to 95.04 four weeks ago and a high of 97.79 percent in February. The extreme reading warns that stocks are at risk of a significant drawdown.

Stock Market Value Indicator

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

Conclusion

We remain in the early stages of a bear market, with the bull-bear indicator at 60%. Stock pricing is extreme, warning of the risk of a significant drawdown.

Acknowledgments

Posted on

US Weekly Market Indicators

Bull/Bear Market Indicator
Stock Market Pricing Indicator

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 the five leading indicators signaling risk-off:

Bull-Bear Market Indicator

We have revised our Heavy Truck Sales indicator to use a 12-month moving average of unadjusted data from the BEA. Recent data revisions were due to adjustments to seasonal factors provided by the Fed. Switching to a 12-month MA eliminates the need for seasonal adjustments.

The graph below compares a buy-and-hold strategy for the S&P 500 (green) to an active strategy (purple) that switches to AA corporate bonds when the Heavy Truck Sales indicator signals risk-off (white bars).

Heavy Truck Sales

The graph below shows an active strategy (blue) that switches to gold when the Heavy Truck Sales indicator signals risk-off (white bars).

Heavy Truck Sales

Stock Pricing

Stock pricing eased to 96.03, compared to 95.04 three weeks ago and a high of 97.79 percent in February. The extreme reading warns that stocks are at risk of a significant drawdown.

Stock Market Value Indicator

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

Conclusion

We remain on the cusp of a bear market, with the bull-bear indicator at 60%. Stock pricing remains extreme, warning of the risk of a significant drawdown.

Acknowledgments

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ASX Weekly Market Snapshot

Bull-Bear Market Indicator
Stock Market Pricing Indicator

The dial on the left indicates bull or bear market status, while the one on the right reflects stock market drawdown risk.

Bull/Bear Market

The ASX Bull-Bear Market indicator fell to 46%. Three of the six leading indicators continue to signal risk-off, but the US bull-bear index (a 40% weighting) declined to 40%.

Bull-Bear Market Indicator

Stock Pricing

ASX stock pricing declined to the 69.61 percentile from a high of 85.83 in February.

Stock Market Value Indicator

The Stock Pricing indicator compares stock prices to long-term sales, earnings, and economic output to gauge market risk. We use z-scores to measure each indicator’s current position relative to its history, with the result expressed in standard deviations from the mean. We then calculate an average for the five readings and convert that to a percentile. The higher that stock market pricing is relative to its historical mean, the greater the risk of a sharp drawdown.

Conclusion

The ASX bull-bear indicator declined to 46%, warning of a bear market, while the risk of a significant drawdown remains high.

Acknowledgments

Posted on

US Weekly Market Snapshot

Bull/Bear Market Indicator
Stock Market Pricing Indicator

The dial on the left indicates bull or bear market status, while the one on the right reflects stock market drawdown risk.

Bull/Bear Market

Our Bull/Bear Market indicator has fallen to 40%, with three of the five leading indicators now signaling risk-off:

Bull-Bear Market Indicator

Heavy truck sales fell to 33.6K units in March, with the 3-month moving average declining more than 15% from its July 2023 high, warning of a recession.

Heavy Truck Sales (Units)

Stock Pricing

Stock pricing eased slightly to 95.09 from a high of the 97.79 percentile six weeks ago. The extreme reading warns that stocks are at risk of a significant drawdown.

Stock Market Value Indicator

The Stock Pricing indicator compares stock prices to long-term sales, earnings, and economic output to gauge market risk. We use z-scores to measure each indicator’s current position relative to its history, with the result expressed in standard deviations from the mean. We then calculate an average for the five readings and convert that to a percentile. The higher that stock market pricing is relative to its historical mean, the greater the risk of a sharp drawdown.

Conclusion

We are now in a bear market, with the bull-bear indicator falling to 40%. Stock pricing remains extreme, warning of the risk of a significant drawdown.

Acknowledgments

Posted on

ASX Weekly Market Snapshot

Bull-Bear Market Indicator
Stock Market Pricing Indicator

The dial on the left indicates bull or bear market status, while the one on the right reflects stock market drawdown risk.

Bull/Bear Market

The ASX Bull-Bear Market indicator remains at 54%, with three of six leading indicators signaling risk-off, while the US bull-bear index (a 40% weighting) is at 60%:

Bull-Bear Market Indicator

The ASX 200 continues in a strong downtrend relative to the gold price in Australian Dollars.

ASX 200 Index Relative to Gold in AUD

The ASX 200 Financials Index (XFJ) is retracing to test resistance at 8500, but remains in a primary downtrend.

ASX 200 Financials Index

Stock Pricing

ASX stock pricing increased to the 76.18 percentile compared to 74.05 two weeks ago, and a high of 85.83 in February.

Stock Market Value Indicator

The Stock Pricing indicator compares stock prices to long-term sales, earnings, and economic output to gauge market risk. We use z-scores to measure each indicator’s current position relative to its history, with the result expressed in standard deviations from the mean. We then calculate an average for the five readings and convert that to a percentile. The higher that stock market pricing is relative to its historical mean, the greater the risk of a sharp drawdown.

Conclusion

The ASX bull-bear indicator at 54% indicates a mild bear market.

We are entering a bear market, and the risk of a significant drawdown is high.

Acknowledgments

Posted on

US Weekly Market Snapshot

Bull/Bear Market Indicator
Stock Market Pricing Indicator

The dial on the left indicates bull or bear market status, while the one on the right reflects stock market drawdown risk.

Bull/Bear Market

Our Bull/Bear Market indicator is unchanged at 60%, with two of the five leading indicators signaling risk-off:

Bull-Bear Market Indicator

We replaced the Coincident Economic Activity Index with Current Economic Conditions from the University of Michigan’s monthly consumer survey. The UOM index offers earlier recession warnings—when the 3-month moving average crosses below 100—and more timely updates.

University of Michigan: Current Economic Conditions

The current reading of 68.20 is a strong bear signal. The Fed Funds target rate is also in a bear cycle, but the two require confirmation from one of the following two indicators:

If the Chicago Fed Financial National Conditions Index rises above -0.40.

Chicago Fed National Financial Conditions Index

Or the S&P 500 30-week Smoothed Momentum crosses below zero.

S&P 500

Stock Pricing

Stock pricing eased slightly to the 95.67th percentile from a high of 97.79 six weeks ago. However, the extreme reading still warns that stocks are at risk of a significant drawdown.

Stock Market Value Indicator

The Stock Pricing indicator compares stock prices to long-term sales, earnings, and economic output to gauge market risk. We use z-scores to measure each indicator’s current position relative to its history, with the result expressed in standard deviations from the mean. We then calculate an average for the five readings and convert that to a percentile. The higher that stock market pricing is relative to its historical mean, the greater the risk of a sharp drawdown.

 

Conclusion

There’s little change this week. We are close to a bear market, with the bull-bear indicator at 60%. Stock pricing is still extreme, highlighting the risk of a significant drawdown.

Acknowledgments

Posted on

US Weekly Market Snapshot

Bull/Bear Market Indicator
Stock Market Pricing Indicator

The dial on the left indicates bull or bear market status, while the one on the right reflects stock market drawdown risk.

Bull/Bear Market

The Bull/Bear Market indicator rebounded to 60%, due to data revisions to heavy truck sales. Two of the five leading indicators now signal Risk-off:

Bull-Bear Market Indicator

Heavy truck sales were revised up to a seasonally adjusted 37,823 units in December, after an earlier report at 35,152 units. January sales jumped to a hot 44,499 units confirming that economic activity is not slowing.

Heavy Truck Sales (units)

This is the second time that a heavy trucks data revision has affected our model. We will investigate using a 3-month moving average to reduce the impact of revisions.

Stock Pricing

Stock pricing eased slightly to 97.75 from the 97.91 percentile two weeks ago. The extreme reading continues to warn that stocks are at risk of a significant drawdown.

Stock Market Value Indicator

The Stock Pricing indicator compares stock prices to long-term sales, earnings, and economic output to gauge market risk. We use z-scores to measure each indicator’s current position relative to its history, with the result expressed in standard deviations from the mean. We then calculate an average for the five readings and convert that to a percentile. The higher that stock market pricing is relative to its historical mean, the greater the risk of a sharp drawdown.

Conclusion

We are close to a bear market, with the bull-bear indicator revised to 60%. Stock pricing remains extreme, increasing the risk of a significant drawdown, warning not to increase exposure to risk assets like growth stocks.

Acknowledgments

Posted on

Weekly Stock Market Snapshot

Bull/Bear Market Indicator
Stock Market Pricing Indicator

The dial on the left indicates bull or bear market status, while the one on the right reflects stock market drawdown risk.

Bull/Bear Market

The Bull/Bear Market indicator remains at 60%, with the two yield-curve indicators signaling Risk-off:

Bull-Bear Market Indicator

The Fed is cutting interest rates which usually flags a bear market.

Fed Funds Target rate: Mid-point

However, financial market conditions remain ultra-easy. Also, the coincident economic index (below) held above its 2.5% threshold in November, heavy truck sales are robust, and employment in cyclical sectors is close to record highs.

Coincident Economic Activity

Stock Pricing

Stock pricing eased to the 97.90 percentile from 97.99 last Friday. The extreme reading warns that stocks remain at risk of a significant drawdown. Stock valuations, however, give no indication as to market timing:

Markets can remain irrational a lot longer than you and I can remain solvent. ~ A.Gary Shilling (1986)

Stock Market Value Indicator

The Stock Pricing indicator compares stock prices to long-term sales, earnings, and economic output to gauge market risk. We use z-scores to measure each indicator’s current position relative to its history, with the result expressed in standard deviations from the mean. We then calculate an average for the five readings and convert that to a percentile. The higher that stock market pricing is relative to its historical mean, the greater the risk of a sharp drawdown.

Conclusion

We are at the cusp of a bear market, with the bull-bear indicator at 60%, and stock pricing is extreme, warning of the risk of large drawdowns.

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