Warning Signs 03 (Jun 19 - Dec 20)

Re: Warning Signs 03 (Jun 19 - Dec 20)

Postby winston » Sun Nov 03, 2019 5:36 pm

This Pattern Is Another Warning Sign for Stocks

by Jeff Clark

High-yield bonds are sending the stock market a warning sign.

Yes, the S&P 500 made a new all-time high on Wednesday. Yes, the Fed’s easy money policy is helping to boost stock prices. Yes, President Trump wants a higher stock market. And yes, we are entering a seasonally bullish period for stocks.

And, if high-yield bonds were making new highs along with stocks this week, then I’d have to wipe the bearish egg off my face and concede that the stock market isn’t in as much trouble as I thought.

But…

As we’ve pointed out many times before, the action in high-yield bonds tends to precede the action in the stock market by anywhere from two days to two weeks.

So, it’s notable that while the S&P was posting a new all-time high on Wednesday, junk bonds were falling.

And, by the look of the following chart of the iShares iBoxx High Yield Corporate Bond ETF (HYG), junk bonds look vulnerable to a much more serious decline.

Take a look…

This chart is forming a rising wedge pattern with negative divergence on the MACD and CCI momentum indicators. In other words, as HYG has been pushing higher and making higher highs over the past few months, the momentum indicators have been making lower highs.

This pattern usually leads to a breakdown – which means a selloff in the high-yield bond market.

That would be bearish for stocks.

And, if we combine this setup with the recent increase in bullish investor sentiment (a contrary indicator), the complacent level of the Volatility Index (VIX), and the huge price difference in VIX call options over VIX put options…

Then that gives trades plenty of reason to be cautious – or maybe even bearish – on the short-term prospects of the stock market.

Source: Investor Place

https://finance.yahoo.com/news/jeff-cla ... 06522.html
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Re: Warning Signs 03 (Jun 19 - Dec 20)

Postby behappyalways » Fri Nov 08, 2019 5:20 pm

While many people view Buffett as the world's pre-eminent investor, in the years since the financial crisis — when Buffett made a number of profitable deals — Berkshire Hathaway has delivered a 353% return while the S&P 500 index has delivered 468% in gains when dividends are included. This year alone, Berkshire's stock is up just 8% compared to the total market's 25% gain.


As Buffett seeks big acquisition, Berkshire trails S&P
https://finance.yahoo.com/news/buffett- ... 53508.html
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Re: Warning Signs 03 (Jun 19 - Dec 20)

Postby winston » Fri Nov 15, 2019 1:27 pm

5 Warning Signs of Market 'Euphoria'

BY MARK KOLAKOWSKI

RBC's year-end 2019 target of 2,950 for the index, 4.7% below the Nov. 12 close, according to a recent story in Barron's.

1. Asset managers have bullish positions in U.S. equity futures similar to the highs before the financial crisis, risking a big negative reaction to bad news.

2. U.S. stock valuations are near their late 2017 highs.

3. Earnings forecasts for 2020 are too optimistic.

4. Stock prices anticipate a phase one U.S.-China trade agreement, but business confidence remains seriously damaged.

5. The S&P 500 has risen nearly 32% above its Dec. 2018 low, similar to previous rallies off lows in 2010, 2011 and 2016 that paused.


Source: Investopedia

https://www.investopedia.com/5-warning- ... yptr=yahoo
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Re: Warning Signs 03 (Jun 19 - Dec 20)

Postby winston » Sat Nov 16, 2019 9:52 am

not vested

Recession Warning: Freight Volumes Negative YoY For 11th Straight Month

by Mike Shedlock

The Cass Freight Index once again warns again of economic contraction.

Source: Mish Talk

https://www.investmentwatchblog.com/rec ... ght-month/
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Re: Warning Signs 03 (Jun 19 - Dec 20)

Postby winston » Mon Dec 09, 2019 3:27 pm

U.S. banks' reluctance to lend cash may have caused repo shock - BIS

By Olga Cotaga

LONDON, Dec 9 (Reuters) - The unwillingness of the top four U.S. banks to lend cash combined with a burst of demand from hedge funds for secured funding, could explain a recent spike in U.S. money market rates, the Bank for International Settlements said.

Cash available to banks for short-term funding all but dried up in late September, and interest rates deep in the plumbing of U.S. financial markets climbed into double digits.

That forced the Fed to make an emergency injection of billions of dollars for the first time since the global financial crisis more than a decade ago.

While the exact cause of the squeeze is unclear - with explanations ranging from large withdrawals for quarterly tax payments to a big settlement of a trade in U.S. Treasuries - BIS analysts said the growing reliance on the biggest U.S. banks, to keep the repo market functioning may have been a big factor.

The big four banks, which BIS did not name in its report,have become net providers of funds to repo markets as they account for more than half of all Treasuries held by banks in the United States at the Federal Reserve.

The repo market underpins much of the U.S. financial system,helping ensure banks have liquidity to meet their daily operational needs.

In a repo trade, Wall Street firms and banks offer U.S.Treasuries and other high-quality securities as collateral toraise cash, often just overnight, to finance their trading and lending. The next day, borrowers repay the loans plus what is typically a nominal rate of interest and get their bonds back.

In other words they repurchase, or repo, the bonds.

The system typically hums along with the interest rate charged on repo deals hovering close to the Fed's benchmark overnight rate, which it cut on Wednesday to 1.75%-2.00% from 2.00%-2.25%.

But in late September, interest rates shot up to as high as 10% for some overnight loans, more than four times the Fed's policy rate, raising concerns about the fragility of U.S. dollar funding markets.

After the U.S. Federal Reserve began to run down its $4trillion plus balance sheet from October 2017, banks' cash reserves at the Fed also contracted, while their holdings of U.S. Treasuries grew rapidly, the BIS said.

That reduction in cash holdings at the Fed sped up after the U.S. debt ceiling was suspended in early August.

The Treasury drained more than $120 billion of reserves from Aug. 14 to Sept. 17, reducing the cash buffers of the big four banks and hence their willingness to lend in the repo market,the BIS found.

The repo rate rose to an intraday high of about 700 basis points, with some trades reportedly occurring at up to 10%.

"The dislocations suggest that central banks post-crisis unconventional operations have left a profound imprint on market functioning," said Claudio Borio, head of the monetary and economic department at BIS.

"Banks get used to a protracted period of abundant excess reserves, withdrawing them may result in unpredictable and sudden market adjustments. It is as if a muscle had atrophied,"he said.

That rush for short-dated secured funding was exacerbated by hedge funds who had ramped up their Treasury repos to fund arbitrage trades between cash bonds and derivatives.

The BIS also noted that the spike in the repo rate spilled over into the currency derivatives market, on which banks rely increasingly for short-term funding.

In the past three years, FX swap volumes have grown to make up as much as 49% of the overall foreign exchange market due to the growing participation of lower-tier banks which depend on swaps for funding as they lack direct access to U.S. dollarmarkets.

"Repo markets, alongside the.. .FX swap market for U.S. dollar funding, may again find themselves in the eye of the storm should financial stress arise at some point," Borio said.

"The surge in FX short-dated swap trading. ..underlines this risk."

Source: Reuters

https://sg.uobkayhian.com/page/SLQG_New ... D=34685277
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Re: Warning Signs 03 (Jun 19 - Dec 20)

Postby winston » Sat Dec 14, 2019 6:53 pm

Warning Signs
1. Bearish Divergence - Small Caps
2. Narrow Participation - New Highs
3. Inverted Yield
4. Weak Transportation Numbers - Dow Theory
5. Strong Precious Metal Sector
6. Weak Manufacturing Numbers
7. Insiders Selling: US$26b till date; Highest US$37b in 2000
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Re: Warning Signs 03 (Jun 19 - Dec 20)

Postby winston » Tue Dec 17, 2019 8:42 am

A "Market" That Needs $1 Trillion in Panic-Money-Printing by the Fed to Stave Off Implosion Is Not a Market

by Charles Hugh Smith

The dirty little secret that nobody dares whisper lest the whisper trigger a self-reinforcing avalanche is that this Fed-manipulated "market" is illiquid.

The Fed's game is to create the illusion of liquidity by being the buyer of last resort, only now the Fed is the only buyer.

Why has the Fed been forced to panic-money-print $1 trillion to stave off an implosion of their phony "market"?


Source: Of two Minds

https://www.oftwominds.com/blogdec19/no ... 12-19.html
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Re: Warning Signs 03 (Jun 19 - Dec 20)

Postby winston » Tue Dec 31, 2019 8:39 pm

Market Sentiment and Valuation Are on Thin Ice

The S&P 500 is at its peak level of overvaluation for the year.

By GUY ORTMANN

While the major equity index charts have yet to shows signs of a shift in trend, we believe that the "ice" supporting the markets is dangerously thin given valuation and sentiment that are at levels typically coincident with market corrections.

As such, we remain "neutral" in our near-term market outlook and may turn more negative should the charts start to weaken.


https://realmoney.thestreet.com/investi ... yptr=yahoo
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Re: Warning Signs 03 (Jun 19 - Dec 20)

Postby winston » Sat Jan 04, 2020 11:58 am

The Two Charts You Need to Ignore or Rationalize Away in 2020 (Unless You're a Bear)

by Charles Hugh Smith

As recently as February 2016, total market cap of U.S. stocks was less than $19 trillion. The value of U.S. stocks have risen by almost 75% in a mere four years, yet the Fed's QE is supposed to have the exact same effect in an $33 trillion market as it did in an $18.9 trillion market?


Apple's operating income is at best flat. How the human mind spins stagnation into another $500 billion in valuation, can only be understood as Pavlovian front-running, which can also be understood as the herd thundering off the cliff.


Source: Of Two Minds

https://www.oftwominds.com/blogjan20/tw ... s1-20.html
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Re: Warning Signs 03 (Jun 19 - Dec 20)

Postby winston » Thu Jan 09, 2020 1:22 pm

The “Warren Buffett Indicator” — which measures the total market cap of U.S. stocks versus U.S. GDP is at a record high of 153%.

Before the Great Recession hit right around 2007 (and before stocks crashed...), this closely watched ratio reached a high of 137%.

And before the dot com crash in 1999, the ratio peaked at 146%.

Source: Yahoo Finance
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