Tag: Bull-Bear Market Indicator

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US Market Snapshot

Bull/Bear Market Indicator
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 stock market valuation. 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

The Bull/Bear indicator remains at 40%, warning of a bear market ahead, with three of five indicators signaling risk-off.

Bull-Bear Market Indicator

Heavy truck sales were revised down to 25,500 units in November, with the 12-month MA falling to 35,200. Declining truck sales are now at recession levels, indicating that economic growth is slowing.

Heavy Truck Sales (Units)

Stock Pricing

Stock pricing increased to 98.57 percent, close to its October high of 98.66, and above the low of 95.04 percent in April. The extreme pricing 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 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.

Warren Buffett’s favorite stock market valuation metric compares market capitalization to nominal GDP. The ratio has reached a record high of 2.99 compared to a 50-year average of 1.18, indicating that stock market pricing is extreme.

Stock Market Capitalization/GDP

Robert Shiller’s CAPE ratio compares the S&P 500 index to a 10-year average of inflation-adjusted earnings. The current value of 40.1 is the highest outside of the 1999-2000 Dotcom bubble.

Robert Shiller's CAPE Ratio

Conclusion

The bull-bear indicator at 40% signals a bear market ahead, while extreme pricing increases the risk of a significant drawdown.

Acknowledgments

Notes

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ASX Market Snapshot

Bull-Bear Market Indicator
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 Market indicator remains at 66%, up from 56% seven weeks ago. Three of four indicators from Australia and two from China indicate a risk-on stance, with a combined 60% weighting, while the US Bull/Bear indicator, which accounts for the remaining 40%, is more bearish.

ASX Bull-Bear Market Indicator

The ASX 200 Financials Index (XFJ) remains in an uptrend despite its recent dip below the 50-week weighted moving average. A breach of primary support at 9000, however, would signal reversal to a downtrend.

ASX 200 Financials

Stock Pricing

ASX stock pricing increased to 81.05 percent from 79.44 percent last week, roughly midway between the August high of 92.23 percent and the April low of 67.85 percent.

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 ASX bull-bear indicator indicates a mild bull market, with most leading indicators declining but remaining above the risk-off threshold. Stock market pricing is below the August high, but does not signal a buy opportunity.

Acknowledgments

Posted on

US Market Snapshot

Bull/Bear Market Indicator
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 stock market valuation. 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

The Bull/Bear indicator remains at 40%, warning of a bear market ahead. One labor market data indicator (highlighted in orange below) remains delayed due to the recent US government shutdown.

Bull-Bear Market Indicator

Employment in cyclical sectors has declined by 111,000 from its February peak of 27,824,000. A decline of 300,000 would trigger a recession warning. Cyclical sectors — Manufacturing, Construction, Transportation, and Warehousing — account for less than 20% of the total workforce but typically experience most job losses during a recession.

Cyclical Employment

The University of Michigan consumer survey reported the lowest index value ever recorded for current economic conditions since the survey began in 1960.

University of Michigan: Current Economic Conditions

However, the stock market remains buoyant and has not yet confirmed the bear signal.

Stock Pricing

Stock pricing increased slightly to 98.50 percent from 98.48 percent last week, close to its high of 98.66 percent in late October and well above the low of 95.04 percent in April. The extreme pricing 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 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.

The S&P 500 Forward Price-Earnings ratio is at 25.0, compared to the historic high of 28.0 during the Dotcom bubble and a 50-year moving average of 16.3. Before the 1999/2000 Dotcom bubble, the forward PE had never risen above 20.0 over the preceding century.

S&P 500 Forward Price-Earnings Ratio

Conclusion

The bull-bear indicator at 40% signals a bear market ahead, while the extreme pricing increases the risk of a significant drawdown.

Acknowledgments

Notes

Posted on

US Market Snapshot

Bull/Bear Market Indicator
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 stock market valuation. 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

The Bull/Bear indicator remains at 40%, warning of a bear market ahead. One labor market data indicator (highlighted in orange below) remains delayed due to the recent U.S. government shutdown.

Bull-Bear Market Indicator

Continued unemployment claims declined to 1.838 million, seasonally adjusted. No explanation was provided for the sharp fall, with Wolf Richter attributing it to problems with seasonal adjustments and the holiday season. Unadjusted data show a similar decline in the last week but a year-on-year increase of 43K (2.5%).

Continued Claims

The Chicago Fed National Financial Conditions Index declined -0.546 on December 5, indicating loose monetary conditions that support high stock prices.

Chicago Fed National Financial Conditions Index

However, Bitcoin is still testing support at 90,000. The cryptocurrency provides an up-to-date view of liquidity, and a fall below 85,000 would warn of another financial market contraction.

Bitcoin (BTC)

Stock Pricing

Stock pricing eased slightly to 98.48 percent from 98.55 percent last week, compared to a high of 98.66 percent in late October and a low of 95.04 percent in April. The extreme pricing 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 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 at 40% signals a bear market ahead, while extreme price levels increase the risk of a significant drawdown.

Acknowledgments

Notes

Posted on

ASX Market Snapshot

Bull-Bear Market Indicator
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 Market indicator remains at 66%, up from 56% five weeks ago. Three of four indicators from Australia and two from China indicate a risk-on stance, with a combined 60% weighting, while the US Bull/Bear indicator, which accounts for the remaining 40%, is more bearish.

ASX Bull-Bear Market Indicator

NAB forward orders declined to 1, while the 3-month moving average (0.67) remains above the risk-off threshold of zero.

Australia: NAB Forward Orders

China’s OECD composite leading indicator declined to 99.17 for November, slightly above the 99 threshold for a risk-off signal.

China: OECD Composite Leading Indicator

Stock Pricing

ASX stock pricing increased to 80.70 percent from 80.24 percent last week, compared with the August high of 92.23 percent and the April low of 67.85 percent.

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 ASX bull-bear indicator is in a mild bull market. Leading indicators are declining, but in most cases, remain above the risk-off threshold. Valuation is also extreme despite the decline from the August high.

Acknowledgments

Posted on

ASX Market Snapshot

Bull-Bear Market Indicator
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 the market valuation is high, but advise caution when adding new positions.

Bull/Bear Market

The ASX Bull-Bear Market indicator remains at 66%, up from 56% four weeks ago. Three of four indicators from Australia and two from China indicate a risk-on stance, with a combined 60% weighting, while the US Bull/Bear indicator, which makes up the balance, is at 40% risk-on.

ASX Bull-Bear Market Indicator

Australian building approvals for private dwellings remain above their long-term moving average, with the 3-month moving average at 15,600 in October.

Australia: Private Dwelling Approvals

China’s NBS Manufacturing PMI increased to 49.2 in November, also above the 49.0 threshold for a risk-off warning.

China: NBS Manufacturing PMI

Stock Pricing

ASX stock pricing declined to 80.24 percent, compared with the August high of 92.23 percent and the April low of 67.85 percent.

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 that stock market pricing is relative to its historical mean, the greater the risk of a sharp drawdown.

The All Ordinaries dividend yield is at a low 3.18%, just above the 3.0% level typical of an overpriced market.

All Ordinaries Dividend Yield

Conclusion

The ASX bull-bear indicator remains in a mild bull market, with China’s NBS Manufacturing PMI holding above its signal line. Valuation is declining after reaching a new extreme, but the risk of a significant drawdown remains high.

Acknowledgments

Posted on

US Bear Market & Extreme Pricing

Bull/Bear Market Indicator
Stock Market Pricing Indicator

The gauge on the left indicates whether the market is in a bull or bear phase, and the one on the right reflects the current stock market valuation levels. 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 the market valuation is high; however, we recommend exercising caution when adding new positions.

Bull/Bear Market

The Bull/Bear indicator remains at 40%, signaling a bear market ahead. We have received updates for two of the three market indicators that were delayed by the US government shutdown, but are still waiting on an update for heavy truck sales (marked in orange below).

Bull-Bear Market Indicator

The Chicago Fed National Financial Conditions Index eased to -0.538 on November 14, indicating loose monetary conditions that support high stock prices.

Chicago Fed National Financial Conditions Index

However, a steep plunge in Bitcoin over the last few days warns of a liquidity contraction that will likely show up in financial conditions in the next few weeks.

Bitcoin (BTC)

Continued unemployment claims increased to almost 2 million, while the unemployment rate rose to 4.4%, both reflecting a slowly deteriorating labor market.

Continued Claims & Unemployment Rate

Of greater concern is the loss of 100 thousand jobs in cyclical sectors since February. A fall of 300 thousand from the February high would signal risk-off. Employment in manufacturing, construction, and transport and warehousing accounts for sizable job losses during a recession, which typically triggers an economic contraction.

Jobs in Cyclical Industries

Stock Pricing

Stock pricing decreased slightly to 98.15 percent, compared to a high of 98.66 percent in late October and an April low of 95.04 percent. The extreme pricing 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 of 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.

The S&P 500 climbed to a record high of 3.28 times sales, compared to its long-term average of 1.8 times sales, an 82% premium.

S&P 500 Price-to-Sales

Conclusion

The bull-bear indicator at 40% warns of a bear market ahead, while extreme pricing increases the long-term risk of a significant drawdown.

Acknowledgments

Notes

Posted on

US Extreme Stock Pricing

Bull/Bear Market Indicator
Stock Market Pricing Indicator

The gauge on the left indicates whether the market is in a bull or bear phase, and the one on the right reflects the current stock market valuation levels. 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 the market valuation is high; however, we recommend exercising caution when adding new positions.

Bull/Bear Market

The Bull/Bear indicator remains at 40%, signaling a potential bear market ahead. Updates to three market indicators (highlighted in orange below) are delayed because of the US government shutdown. The first BLS release of delayed data is scheduled for Thursday, November 20.

Bull-Bear Market Indicator

The Chicago Fed National Financial Conditions Index eased to -0.5349 on November 7, indicating loose monetary conditions that support high stock prices. However, a sharp decline in Bitcoin over the last few days warns of a contraction.

Chicago Fed National Financial Conditions Index

Stock Pricing

Stock pricing increased slightly to 98.37 percent, compared to a high of 98.66 percent in late October and an April low of 95.04 percent. The extreme pricing 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 of 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.

A forward PE of 24.8 indicates the S&P 500 is trading at more than a 50 percent premium to its long-term average of 16.1 times projected earnings.

S&P 500 Forward PE

Conclusion

The bull-bear indicator at 40% warns of a bear market ahead, while extreme pricing increases the long-term risk of a significant drawdown.

Acknowledgments

Notes

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