Warning Signs 03 (Jun 19 - Jun 23)

[winston]

This stock-market indicator produced a ‘timely’ buy signal in March, and now its message is: Sell

By Callum Keown

Morgan Stanley said its combined market timing indicator (CMTI) was now giving a sell signal for the first time since January 2018.

The indicator, which factors in equity valuations, fundamentals and risk, gave a “timely buy signal” in early March and remained in buy territory until mid-June, the U.S. investment bank’s strategists said.

Improved earnings revisions and mutual fund flows turning “less negative” in the past two weeks has led to the CMTI now producing a sell signal, the strategists said.

The bank’s equity strategist also said the U.S. dollar was the most oversold in 40 years, noting that its macro strategists have turned tactically neutral on the currency from a bearish stance last week.

Goldman Sachs economists now expect at least one coronavirus vaccine to be approved later this year, leading to a boost to U.S. economic growth in the first half of 2021.

Source: Market Watch

https://www.marketwatch.com/story/this- ... yptr=yahoo

[winston]

Warren Buffett said this metric signaled the 2001 crash — now it’s sounding the alarm on global markets

By Shawn Langlois

A sell signal is flashing on Buffett’s favorite indicator

“Buffett Indicator” is simply the total market cap of all U.S. stocks relative to the country’s GDP.

When it’s in the 70% to 80% range, it’s time to throw cash at the market.

When it moves above 100%, it’s time to lean toward risk-off.

Source: Market Watch

https://www.marketwatch.com/story/warre ... yptr=yahoo

[winston]

The top five stocks in the S&P 500 market cap weighted index (the widely followed benchmark) now represents nearly 30% of the value of the index. That's all big tech.

Source: Forbes

[winston]

New traders are taking on huge risk ... how to gamble wisely ... the numbers behind safe speculations

In recent months, the number of small guys in the market (like you and me) has exploded 150%.

Last year, retail investors accounted for 10% of market activity. In the wake of the late-March low, that percentage has climbed as high as 25%.

Add to that a new Yahoo Finance-Harris poll from Wednesday finding that "43% of retail investors said they are using options, margin, or both."

In 2020 so far, there has been an average of 28 million options contracts per day, up 45% from last year, according to the Options Clearing Corp ...

Just under half (44%) of the survey respondents said they have been trying to time the market.

And for those investors actively trying to take advantage of the market's moves, the average number of trades per month is 4.5.

The survey shows that the group making the most trades are those with household income of less than $50,000.

Source: Investor Place

[winston]

High stock valuations nothing new

Compared to what analysts are forecasting for its earnings in the upcoming 12 months, the S&P 500 earlier this month also was at its highest level since 2000.

The S&P 500 was recently trading at more than 30 times its average earnings over the last 10 years, adjusted for inflation. That’s above its average of 26.1 over the last decade or of 20.5 over the last 50 years.

“Buffett indicator”: the total market value of stocks relative to the overall size of the economy. It’s been higher than the U.S. gross domestic product from 2010 onward.

Source: AP

https://www.thestandard.com.hk/breaking ... othing-new

[winston]

Sign Of The Top? Porn Star Pitches 'Trading Seminar' - "It's The Right Time To Get Into Stocks"

by Tyler Durden

Source: Zero Hedge

https://www.zerohedge.com/markets/sign- ... newsletter

[winston]

It’s been years since investors have been this fearful of a stock market crash, Nobel-winning economist warns

By Shawn Langlois

‘No one knows the future, but given the general lack of investor confidence amid a pandemic and political polarization, there is a chance that a negative, self-fulfilling prophecy will flourish.

This highlights the importance of being well diversified in asset classes — including Treasury securities, which are safe — and not overexposed to U.S. equities now.’

Crash Confidence Index: Shiller said he asks investors this question: “What do you think is the probability of a catastrophic stock market crash in the U.S., like that of Oct. 28, 1929, or Oct. 19, 1987, in the next six months, including the case that a crash occurred in the other countries and spreads to the U. S.?”

He said the bearish answers to that question registered one of the lowest readings in confidence he’s ever seen.

The CAPE ratio, is currently at levels higher than any period in history, aside from the lead-up to the Great Depression in the 1920s and just before the popping of the dot-com bubble about 20 years ago.

Source: Market Watch

https://www.marketwatch.com/story/its-b ... eid=yhoof2

[winston]

Beware These 10 Signs of a Market Top

by David Einhorn

1. Initial public offering mania

2. High valuations and new metrics for valuation

3. Market concentration in a single sector and a few stocks

4. S&P 500-type market capitalizations for second-tier stocks that most people haven't heard of

5. A situation where the more fanciful and distant the narrative, the better the stock performs

6. Outperformance of companies suspected of fraud based on the belief that there is no enforcement risk, without which "crime pays"

7. Outsized reaction to economically irrelevant stock splits

8. Increased participation of retail investors, who appear focused on the best-performing names

9. Incredible trading volumes in speculative instruments, like weekly call options and worthless common stocks

10. A parabolic ascent toward a top.

Source: The Oxford Club

[winston]

The stock market is signaling a ‘severe’ drop is imminent, says contrarian strategist

By Barbara Kollmeyer

True Contrarian's Steven Jon Kaplan:

“What I notice the most is investors crowding into the stock market and making record inflows, while insiders have never been selling more heavily than they have done in November 2020”.

Kaplan says “a lot of things are going to be dropping by 30% or 40%,” and believes we are in a bear market, so suggests looking at pullbacks between 2000 and 2003 for an idea of what’s ahead.

“We also have safe-haven assets like TLT TLT (iShares 20+ Year Treasury exchange-traded fund), the U.S. dollar index DXY, and VIX VIX (which measures stock volatility) forming important bases in what looks like preparation for significant rallies,” he says.

“Usually when these ‘Three Musketeers’ climb higher, almost everything else will soon be moving lower.”

Kaplan expects it will take four or five months to flush out investors who bought shares at prices that were too high and reward the insiders who were getting out, before a rebound starts. Then investors can watch for signals such as insider buying, and of course, the big three.

Source: Market Watch

https://www.marketwatch.com/story/a-sev ... eid=yhoof2

[winston]

Stock-market values recently reached levels seen on the eve of 1929 crash, by one measure

By Mark DeCambre

CAPE ratio of price-to-earnings

One reason for pricey stocks is the extremely low levels of government bond yields.

Source: Market Watch

https://www.marketwatch.com/story/stock ... eid=yhoof2