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Inside The Stock Market ...trends, cross-currents, and outlook

Dec 07 2018

Bull Pause, Or Bear Paws?

  • Dec 7, 2018

The old maxim says that when the bears have Thanksgiving, the bulls have Christmas.

Dec 07 2018

Stock Market Observations

  • Dec 7, 2018

The tops of 1990, 2000, and 2007 were all better “telegraphed” by the action of the market itself, than the September 2018 peak, but secondary measures of market internals suggested all summer that the internal trend was in fact deteriorating—and so did the action in low-grade corporate bonds.

Dec 07 2018

It’s Not A Pause… It’s “Paws”

  • Dec 7, 2018

A bear market will almost always prove to be the catalyst of one or more shifts in long-term market leadership.

Dec 07 2018

It’s About Money, Not Profits

  • Dec 7, 2018

The consensus focus all year has been on the boom in U.S. corporate profits.

Dec 07 2018

Economic Stocking Stuffers

  • Dec 7, 2018

While the monetary and liquidity backdrop has deteriorated all year, the shorter-term economic evidence has remained mixed.

Dec 07 2018

VLT = Very Lousy Timing?

  • Dec 7, 2018

In the spirit of keeping an open mind, three months ago we observed that our S&P 500 VLT Momentum measure had triggered a “moderate-risk” BUY signal with its August reading.

Dec 07 2018

Low Vol For All Seasons?

  • Dec 7, 2018

The S&P 500 Low Volatility Index has performed so well for so long that the ETF based on the index has amassed more than $8 billion.

Dec 07 2018

The Downside Leaders Look Familiar

  • Dec 7, 2018

It wouldn’t be a December Green Book without at least one page of hand-wringing over the year’s extreme underperformance of foreign stocks.

Dec 07 2018

Deep-Six The “Threes-Fives”

  • Dec 7, 2018

We’ve sometimes called the yield curve our “favorite economist,” so we were amused when some enthusiastic data miner in the Treasury market tried to slip us a cheap imitation in late November.

Dec 07 2018

They Can’t Tax What’s Not Earned

  • Dec 7, 2018

With three quarters of a sharply lower corporate tax rate on the books, the median four-quarter trailing profit margin for both the S&P 500 and S&P MidCap 400 jumped to all-time records in the third quarter.

Dec 07 2018

Earnings Releases Cause Surge In Price Volatility

  • Dec 7, 2018

Three years ago, we did a series of studies looking at price reactions to corporate earnings releases (ER) and we found that, since 2007, price movement has become more dramatic on ER days.

Dec 07 2018

Time To Hide In Quality?

  • Dec 7, 2018

Although both High Quality and Low Quality stocks suffered in the last two months’ market turmoil, we are not surprised to see that, on a relative basis, High Quality stocks outperformed Low Quality.

Nov 07 2018

Warning Crack

  • Nov 7, 2018

We wrote in October’s Green Book that “many once reliable seasonal market patterns have been out of sync in recent years.”

Nov 07 2018

The Rate Hike Carnage Is All Around Us

  • Nov 7, 2018

Taking a cue from the White House, today’s market pundits seem more prone to declarative, unsubstantiated statements than we can ever remember.

Nov 07 2018

BAA Acting Baaaadly!

  • Nov 7, 2018

Whether or not they’ve risen for the “right” reasons remains up for debate, but the upward move in interest rates has hit the usual suspects very hard in 2018, like early-cycle industries and Emerging Markets.

Nov 07 2018

Measuring The Backup In Bond Yields

  • Nov 7, 2018

A couple of months ago, we (belatedly) observed that, in February the 10-year Treasury yield had bro-ken above its 10-year moving average. That simplistic tool has been a pretty good descriptor of yields’ long-term trend for more than a century, with few “whipsaw” signals along the way.

Nov 07 2018

Bond Investors Get It Right Again!

  • Nov 7, 2018

Having devoted all of our professional lives to the monitoring and modeling of equity markets, we’re naturally ticked off that this year’s best stock market signals have in fact been rendered by bonds.

Nov 07 2018

Too Soon To Expect Economic Weakness?

  • Nov 7, 2018

We believe stocks have begun to discount a major inflection point in the economy and corporate profits for 2019 and 2020.

Nov 07 2018

For Asset Allocators, As Bad As It Gets!

  • Nov 7, 2018

During 2018, no major asset class has done well, and in most respects the opportunity-set available this year has been among the worst in the last 50 years.

Nov 07 2018

P/E Crash!!

  • Nov 7, 2018

While this year’s liquidity squeeze has yet to exact the toll we ultimately expect on the U.S. stock mar-ket, it has certainly contributed to a sharp compression in P/E multiples.

Nov 07 2018

Emerging Markets: Not Persevering, Just “Preserving”

  • Nov 7, 2018

We’ll never know how world events might have evolved had Mitt Romney won the presidential election in 2012. But thanks to the wonderment of Emerging Markets’ underperformance, we can go right back to the last days preceding that fateful election.

Nov 07 2018

Think Halloween Is Behind Us? Beware, Zombie Alert!

  • Nov 7, 2018

“Zombie” companies are being kept alive by low interest rates and generous credit conditions, and the number of them, worldwide, has risen significantly over the past few years.

Oct 05 2018

Remember Your First SELL?

  • Oct 5, 2018

We’ll never forget the first time we read a SELL recommendation for a stock. It was nearly 30 years ago and we were two weeks into our first job with a small equity management firm.

Oct 05 2018

Stock Market Observations

  • Oct 5, 2018

Throughout the spring and summer, the market could alternatively be characterized as “divergent” or “disjointed”—but until very recently it could not be considered “distributive.” Now, Mid and Small Caps have hit a short-term air pocket and breadth figures were exceptionally poor at September’s scattered highs in the DJIA and S&P 500.

Oct 05 2018

Investor Temperament And The “Tape”

  • Oct 5, 2018

In the first week of October, the share of newsletter bulls topped 61% just as the NYSE percentage slid to 41%. Maybe it’s a seasonal thing… the last time that happened was October 2007.

Oct 05 2018

Seasonality Set To Favor The Bulls

  • Oct 5, 2018

Our bearish stance could be tested by the arrival of the seasonally strongest six-month window of the four-year electoral cycle. Since 1926, November of the mid-term year through April of the pre-election year has produced an average un-annualized S&P 500 +16.4% total return.

Oct 05 2018

Estimating The Downside: The G-Rated Version

  • Oct 5, 2018

The longevity of this bull market is impacting tactical asset allocators in ways great and small.

Oct 05 2018

The Two-Tiered Global Market

  • Oct 5, 2018

We should emphasize that our characterization of stocks as dangerously overvalued applies only to the U.S. market.

Oct 05 2018

Rates Are Already Clobbering Consumer Stocks

  • Oct 5, 2018

“Three steps and a stumble” was the old rule of thumb for timing the impact of Fed tightening on the stock market.

Oct 05 2018

Time To Get Contrary With Commodities?

  • Oct 5, 2018

After a strong 2016 and a “Bridesmaid” (i.e., sector runner-up) performance in 2017, the Materials sector seemed primed to benefit from the “late cycle” character of the economy in 2018.

Oct 05 2018

Narrow Performance Divergence Among EM May Not Last

  • Oct 5, 2018

We’ve previously noted the narrowing performance divergence between top- and bottom-performing Emerging Market (EM) countries in recent years.

Sep 08 2018

Beware The Breakout

  • Sep 8, 2018

The S&P 500 finally erased the losses from its nine-day swoon in January and February.

Sep 08 2018

Beware The Policy “Narrative”

  • Sep 8, 2018

It’s been amusing to watch the narrative surrounding Fed policy evolve as the market has rallied.

Sep 08 2018

Breakout Or Fake-Out?

  • Sep 8, 2018

The S&P 500 has fully erased its January and February losses, but there’s probably a market message in the fact that it took so long to do so.

Sep 08 2018

Technical Difficulties

  • Sep 8, 2018

Traditional breadth measures have yet to show end-of-cycle thinning of the ranks, but some secondary measures suggest that process may be underway.

Sep 08 2018

Fondly Remembering The Year 2000...

  • Sep 8, 2018

Many equity investors have suggested there’s no comparison between today’s expensive market and the bubble peak of Y2K, pointing out that today’s Technology titans are “real companies” with massive revenue underpinnings.

Sep 08 2018

The Commodity Bull That Equity Investors Missed...

  • Sep 8, 2018

While the bottom-line impact may ultimately be the same, there’s one thing we find more demoralizing than getting the direction of an asset wrong: getting the direction right and not getting paid for it.

Sep 08 2018

Real Rates And The Federal Deficit

  • Sep 8, 2018

We previously mentioned the increasing focus on the real short-term interest rate as an important measure of the Fed’s policy stance. In truth, we wish the Fed had paid more attention to this measure during this cycle.

Sep 08 2018

VLT Turns Up Again??

  • Sep 8, 2018

A “moderate-risk” S&P 500 VLT BUY signal was triggered at the end of August, but it’s not all good news. Any upturn in the VLT while the indicator is in positive territory also sets up a pattern known to veteran market analysts as the “Killer Wave.”

Sep 08 2018

S&P 500—Valuation Check-Up

  • Sep 8, 2018

In late January we speculated how long it would take for the S&P 500’s bloated valuations to reach more reasonable levels. The S&P 500 now trades back where it was in January and the seven-month break included some of the best growth rates most have ever seen. We found ourselves asking: Did chubby Mr. Market shed any pounds as he pedaled away on his stationary bike?