Best of the Week
Most Popular
1. TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
2.Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
3.GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
4.Crypto Bubble Bursts! Nicehash Suspends Coinbase Withdrawals, Bitcoin, Ethereum Bear Market Begins - 16th May 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
7.Stock Market - Should You Be In Cash Right Now? - 17th May 21
8.Gold to Benefit from Mounting US Debt Pile - 14th May 21
9.Coronavius Covid-19 in Italy in August 2019! - 13th May 21
10.How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part 2 of 2 - 18th May 21
Last 7 days
Investing in the Tulip Crypto Mania 2021 - 19th Jun 21
Here’s Why Historic US Housing Market Boom Can Continue - 19th Jun 21
Cryptos: What the "Bizarre" World of Non-Fungible Tokens May Be Signaling - 19th Jun 21
Hyperinflationary Expectations: Reflections on Cryptocurrency and the Markets - 19th Jun 21
Gold Prices Investors beat Central Banks and Jewelry, as having the most Impact - 18th Jun 21
Has the Dust Settled After Fed Day? Not Just Yet - 18th Jun 21
Gold Asks: Will the Economic Boom Continue? - 18th Jun 21
STABLE COINS PONZI Crypto SCAM WARNING! Iron Titan CRASH to ZERO! Exit USDT While You Can! - 18th Jun 21
FOMC Surprise Takeaways - 18th Jun 21
Youtube Upload Stuck at 0% QUICK FIXES Solutions Tutorial - 18th Jun 21
AI Stock Buying Levels, Ratings, Valuations Video - 18th Jun 21
AI Stock Buying Levels, Ratings, Valuations and Trend Analysis into Market Correction - 17th Jun 21
Stocks, Gold, Silver Markets Inflation Tipping Point - 17th Jun 21
Letting Yourself Relax with Activities That You Might Not Have Considered - 17th Jun 21
The Federal Reserve and Inflation - 16th Jun 21
Inflation Soars 5%! Will Gold Skyrocket? - 16th Jun 21
Stock Market Sentiment Speaks: Inflation Is For Fools - 16th Jun 21
Four News Events That Could Drive Gold Bullion Demand - 16th Jun 21
5 ways that crypto is changing the face of online casinos - 16th Jun 21
Transitory Inflation Debate - 15th Jun 21
USDX: The Cleanest Shirt Among the Dirty Laundry - 15th Jun 21
Inflation and Stock Market SPX Record Highs. PPI, FOMC Meeting in Focus - 15th Jun 21
Stock Market SPX 4310 Right Around the Corner! - 15th Jun 21
AI Stocks Strength vs Weakness - Why Selling Google or Facebook is a Big Mistake! - 14th Jun 21
The Bitcoin Crime Wave Hits - 14th Jun 21
Gold Time for Consolidation and Lower Volatility - 14th Jun 21
More Banks & Investors Are NOT Believing Fed Propaganda - 14th Jun 21
Market Inflation Bets – Squaring or Not - 14th Jun 21
Is Gold Really an Inflation Hedge? - 14th Jun 21
The FED Holds the Market. How Long Will It Last? - 14th Jun 21
Coinbase vs Binance for Bitcoin, Ethereum Crypto Trading & Investing During Bear Market 2021 - 11th Jun 21
Gold Price $4000 – Insurance, A Hedge, An Investment - 11th Jun 21
What Drives Gold Prices? (Don't Say "the Fed!") - 11th Jun 21
Why You Need to Buy and Hold Gold Now - 11th Jun 21
Big Pharma Is Back! Biotech Skyrockets On Biogen’s New Alzheimer Drug Approval - 11th Jun 21
Top 5 AI Tech Stocks Trend Analysis, Buying Levels, Ratings and Valuations - 10th Jun 21
Gold’s Inflation Utility - 10th Jun 21
The Fuel Of The Future That’s 9 Times More Efficient Than Lithium - 10th Jun 21
Challenges facing the law industry in 2021 - 10th Jun 21
SELL USDT Tether Before Ponzi Scheme Implodes Triggering 90% Bitcoin CRASH in Cryptos Lehman Bros - 9th Jun 21
Stock Market Sentiment Speaks: Prepare For Volatility - 9th Jun 21
Gold Mining Stocks: Which Door Will Investors Choose? - 9th Jun 21
Fed ‘Taper’ Talk Is Back: Will a Tantrum Follow? - 9th Jun 21
Scientists Discover New Renewable Fuel 3 Times More Powerful Than Gasoline - 9th Jun 21
How do I Choose an Online Trading Broker? - 9th Jun 21
Fed’s Tools are Broken - 8th Jun 21
Stock Market Approaching an Intermediate peak! - 8th Jun 21
Could This Household Chemical Become The Superfuel Of The Future? - 8th Jun 21
The Return of Inflation. Can Gold Withstand the Dark Side? - 7th Jun 21
Why "Trouble is Brewing" for the U.S. Housing Market - 7th Jun 21
Stock Market Volatility Crash Course (VIX vs VVIX) – Learn How to Profit From Volatility - 7th Jun 21
Computer Vision Is Like Investing in the Internet in the ‘90s - 7th Jun 21
MAPLINS - Sheffield Down Memory Lane, Before the Shop Closed its Doors for the Last Time - 7th Jun 21
Wire Brush vs Block Paving Driveway Weeds - How Much Work, Nest Way to Kill Weeds? - 7th Jun 21
When Markets Get Scared and Reverse - 7th Jun 21
Is A New Superfuel About To Take Over Energy Markets? - 7th Jun 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Will The Stocks Cyclical Bull Market Continue?

Stock-Markets / Stock Markets 2011 Aug 24, 2011 - 03:10 PM GMT

By: John_Hampson


Best Financial Markets Analysis ArticleTime to revisit and update this table.

What are historically predictive indicators and measures currently saying?

Green = yes. Yellow = maybe. Red = No.

So, calculated as a rough probability, there is a two thirds chance of continuation. For that reason, and certain choice indicators still shining distinctly green, my current leaning is that we are not heading into a new bear market here but that this will turn out a severe correction. Now, technically, some key global stock indices are already in a bear market, such as the Dax, down 25%, however the leading economy stock indices, those of the USA, still have not breached the 20% rule of thumb. But this rule aside, clearly what we're trying to get at is are we to see many months of a declining market ahead or a turn back up soon?

So, starting from the top of the table: treasury yields/curve and interest rates may be warped by the Fed's actions and therefore not the reliable predictor that they historically have been. That said, the S&P dividend yield exceeds 10 year treasury yields, and neglibile interest rates encourages money out of cash and into dividend-yielding assets. That limits the likelihood of a steady flow of money out of stocks and into cash or bonds. Corporates are in good health too.

Source: Fed St Louis / John Tobey

Money supply is looking particularly positive.

Source: Shadowstats

Since QE2 ended we have actually seen an acceleration in the core money supply measures. Money velocity remains unimpressive but still positive and stable. Of course, if velocity accelerated together with accelerating money supply, we would be heading for severe inflation. So overall, the picture is healthy.

Solar cycles predict growth and inflation into the solar peak of 2013. We have not experienced a US recession in the run up to a solar peak in the last 80 years.

Underlying Source: Data360

US banks have increased lending this year and consumers have been borrowing more too. Increased credit should inspire such growthflation, subject to positive feedback looping.

Source: Fed St Louis / John Tobey

Leading Indicators are mixed. ECRI leading indicators dipped just negative in the latest reading. Conference board indicators are still largely benign. The Chicago Fed National Activity Index came in at -0.06 for July, improved since June and some way from exceeding the -0.70 reading which has previously meant a forthcoming recession. The latest US PMI manufacturing reading was 50.9% - just growing still. This week's European and Chinese initial PMI readings came in above expectations but just negative at 49.7 and 49.8%. In short, the situation is fragile, and there is a risk of negative feedback looping, but as yet the sum situation is yellow not red.

The Bull Market Sustainability Index remains positive, but has weakened. Copper's chart looks technically like a correction in an ongoing uptrend, whereas the Kospi index looks technically broken. Stock market breadth did not diverge negatively on the S&P before the recent breakdown - a typical topping signal - but did so on the Nasdaq.

The Economic Surprises Index remains mired to the downside, with data still coming in significantly worse than economists' expectations. However, the index is at a level that has historically meant a reversal and has brought double digit returns for stocks in the following 12 months. Similarly, the Philly Fed has plunged to -30.7, which on the one hand is a sharp warning, but on the other hand has historically been the prelude to average gains of 23% over the next 12 months in the stock index.

The latest earnings season was one of the weaker quarters since the last recession, but beat Q1 2011. Corporate earnings are forecast to top out in 2012.

Seasonality remains weak over the summer months into the end of September, but by Presidential cycle we remain in a historic sweetspot. We can expect action from the US Government to improve the economy, the jobs and housing markets, in a bid for re-election, and CNBC have reported that Obama is to present a new programme of action in the first week of September. In association, the Fed is likely to make supportive action of some kind.

Bull market historic internals point to continuation into 2013, similar to solar cycles. The oil price has retreated sufficiently to take that lid of growth, and Japan is recovering following its tsunami-related economic shock. However, real US GDP year on year has slipped below 2%, which has historically been the prelude to a recession 10 out of 12 times.

In summary:

The odds still remain in favour of cyclical bull continuation, but the position is more fragile than last summer's soft patch, and there is the risk of negative feedback looping. Europe's debt issues remain at the fore and CDS values as at the end of yesterday for key Euro members remain in parabolic uptrends. There remains the possibility that the recent sharp stock market falls were foretelling a major event ahead, namely a European debt crunch point. However, I believe co-ordinated global policy response at this point in the cycle is still likely to be effective.

This chart captures the summary well:

Source: Macromon / Big Picture

John Hampson, UK / Self-taught full-time trading at the global macro level / Future Studies / Forecasting By Amalgamation.

© 2011 Copyright John Hampson - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in