{"id":65308,"date":"2026-07-18T05:31:22","date_gmt":"2026-07-18T05:31:22","guid":{"rendered":"https:\/\/thepatientinvestor.com\/?p=65308"},"modified":"2026-07-18T05:48:21","modified_gmt":"2026-07-18T05:48:21","slug":"us-asx-leading-indicators","status":"publish","type":"post","link":"https:\/\/thepatientinvestor.com\/index.php\/2026\/07\/18\/us-asx-leading-indicators\/","title":{"rendered":"US & ASX Leading Indicators"},"content":{"rendered":"

We are trialing a new format for the weekly market snapshots, combining the four major indicators into a single post. Your feedback would be welcome.<\/p>\n

US Stock Market<\/h2>\n

\"US<\/p>\n

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 five indicators signal risk-off, indicating medium risk of a US bear market.<\/p>\r\n\r\n

\"Bull\/Bear<\/p><\/div>\n

The Cass Freight Shipments Index 12-month moving average remains in a downtrend, signaling risk-off. The index highlights broad freight shipping levels in the mainstream economy, and a rise or fall of more than 3 basis points signals risk-on or risk-off, respectively.<\/p>\r\n\r\n

\"Cass<\/p><\/div>\n

US Stock Pricing<\/h3>

US stock pricing remains at extreme levels. We changed the composition of the Forward PE and Price-to-Sales indicators in April 2026, so earlier highs are not directly comparable.<\/p>\r\n\r\n

\"US<\/p>\r\n

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 the stock market price measure is relative to the historical mean, the greater the risk of a sharp drawdown.<\/p><\/div>\n

Warren Buffett's favorite long-term measure of stock market valuation provides a stable valuation ratio largely unaffected by fluctuating profit margins.<\/p>\r\n\r\n

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.<\/p>\r\n\r\n

\"Buffett<\/p><\/div>\n

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.<\/p>\r\n\r\n

The current advance on the CAPE ratio is the second-highest in history, behind only the Dotcom bubble in 1999-2000, with values far above their long-term average of 22.4.<\/p>\r\n\r\n

\"Robert<\/p><\/div>\n

Conclusion<\/h3>\n

The US Bull-Bear indicator, led by the transportation sector, flags the early stages of a bear market, while the composite Stock Pricing indicator warns that stocks are extremely over-priced.<\/p>\n

ASX Stock Market<\/h2>\n

\"ASX<\/p>\n

The ASX Bull-Bear Leading Index signals a mild bear market.<\/p>\r\n\r\n

\"ASX<\/p>\r\n\r\n

Australian leading indicators carry a 40% weighting in the ASX Leading Index, China 20%, and the US Leading Index carries the remaining 40%.<\/p><\/div>\n

NAB Forward Orders recovered to zero in May 2026, but the 3-month moving average remains below zero, signaling risk-off.<\/p>\r\n\r\n

\"NAB<\/p><\/div>\n

The ASX 200 Financials Index (XFJ) is above its 50-week weighted moving average, continuing the risk-on signal.<\/p>\r\n\r\n

\"ASX<\/p><\/div>\n

The ASX 200 is above its 50-week moving average, but the long-term downtrend relative to Gold continues, signaling risk-off.<\/p>\r\n\r\n

\"ASX<\/p>\r\n\r\n

Performance of the ASX 200 Index relative to Gold (in Australian Dollars) reflects the real return on Australian Stocks.<\/p><\/div>\n

ASX Stock Pricing<\/h3>

ASX stock pricing indicates that stocks are overvalued, but nowhere near the extremes of the US market. The highest reading was 92.23 percent in August 2025, with a low of 67.85 percent in April 2025.<\/p>\r\n\r\n

\"ASX<\/p>\r\n

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.<\/p><\/div>\n

The All Ordinaries dividend yield is below its long-term mean of 4.1%, indicating values are on the high side. A fall below the 3.0% threshold would signal that stocks are severely overpriced.<\/p>\r\n\r\n

\"ASX<\/p>\r\n\r\n

Note: Lower yields indicate higher values, so we reverse the z-score for the ASX dividend yield.<\/p><\/div>\n

Conclusion<\/h3>\n

The ASX Bull-Bear indicator signals the early stages of a bear market, while the composite Stock Pricing indicator signals stocks are moderately over-priced.<\/p>\n

Related Links<\/h4>