Robert Shiller on StreetSmartPost

StreetSmartPost by Sy Harding, with several insightful observations

Why you should not ignore what Shiller is Saying

Saturday, August 23, 11:45 a.m.

Robert Shiller, Nobel laureate in economics, had an article in the New York Times last weekend, and followed it up with an interview on CNBC Tuesday. Some of his comments:

"There’s something bizarre going on."

"The U.S. stock market looks very expensive right now. . . . . . The CAPE 10 P/E ratio is at 25, far above its 20th century average of 15.21, a level that has been surpassed since 1881 in only three previous periods: the years clustered around 1929, 1999, and 2007. Major market drops followed those peaks."

I will interrupt with an observation:

The fact that the current market valuation level was exceeded three times in those extreme bubbles of the last 130 years, has some believing that until overvaluation reaches those extremes again there is little risk.

It might be well to realize that there have been not three, but 25 bear markets over the last 113 years (as far back as my data goes). Their average decline was 36%. The average of the worst ten was 50%.

So the real story is that market valuation is now much higher than at the peak of 22 of the last 25 bear markets. That is, 88% of the time a bear market began with market valuation at the current level or lower. That is almost 9 to 1 odds against higher prices.

Click on the following link to read the full article at StreetSmartPost
http://bit.ly/1wwm4VA

This has been posted for Educational Purposes Only.   Do your own work and consult with Professionals before making any investment decisions. 
Past performance is not indicative of future results

Correction or Bear Market ?

This was posted on dshort.com 

By

Also see:

Brad Lamensdorf - Lamensdorf Market Timing Report

"Indicators are Cued Up for a Bear market" 

August 2014 (pdf at link below)

http://bit.ly/YRCXuW

This has been posted for Educational Purposes Only.   Do your own work and consult with Professionals before making any investment decisions. 
Past performance is not indicative of future results

Short Term Trend Forecast

Short Term Forecast
The last forecast made on Aug 6th stated:

- Forecast cycle tops and bottoms are (+/-)

1) Bottom August 7th +/-  
2) Top August 12-25 +/-     (This may turn out to be a trading range with a top around Aug12-19 +/- and a bottom around Aug 21 +/- and a final forecast top around Aug 22-25 +/- all within a possible trading range)
3) Bottom September 3rd +/-     A special anniversary date and these type of dates are very interesting to watch.

Following cycles has been good to use as a guide or as a potential future road map, but, other tools must always be used for confirmation of any forecast cycle trends.  

COMMENTS

The Aug 7th forecast low was accurate.  The advance decline oscillator bottomed below -400 and turned up and the volume oscillator was below -100 with rising bottoms.  This is what you would like to see in these indicators at or near a bottom.

The next forecast date is Aug 21st for a forecast low.

UPDATED FORECAST

- Forecast cycle tops and bottoms are (+/-)

1) Bottom Aug 21 +/-
2) Top Aug 22-25 +/-
3) Bottom Sept 3rd +/-     An anniversary date

Since cycles do not distinguish between trading days and calendar days, the cycle dates may come out on Holidays or weekends.  So the dates suggested that do fall on such days are to be used as a window.   So, as always, other tools must always be used for confirmation of any forecast cycle trends.  All forecast dates will still be noted with a "+/-" because the cycle dates are not always as perfect as we would like them to be.  Although they have been pretty accurate.  

  

Intermediate Term forecast 

The downward pressure of the Intermediate Term Cycles helped the DJIA drop 700 points into the Aug 7th short term forecast date.  From the Aug 7th bottom the market displayed a thrust of momentum that suggests that the market can go higher. 

Intermediate term cycles are currently pointing down into August 2014 - September 2014 +/- and there is another short term bottom forecast on Sept 3rd, although it is probable that the bottom was made on Aug 7th.  The next Intermediate Term Forecast is for a top October 2014 +/-.

The only fly in the ointment is shown on the chart posted on July 15th titled "2014 January Barometer".  The chart shows weakness going into September 2014.

If any changes are made to the Short Term or Intermediate Term Forecasts, a new posting will be made. 

So keep following JustSignals using Twitter or Follow By Email.   

Just submit your email address in the box on the Blog homepage

This has been posted for Educational Purposes Only.   Do your own work and consult with Professionals before making any investment decisions. 
Past performance is not indicative of future results

Short Term Trend Forecast

The last forecast made on July 21st stated:

- Forecasted cycle tops and bottoms are (+/-)

Top        July 23-26 +/-    (Very accurate forecast !)

Bottom August 7th +/-     (Today is August 6th and as of today the forecasted cycle top of  July 23-26 was perfect and it took advantage of the 700 point drop in the DJIA - Note that this date was originally forecasted in the July 8th blog posting)

Following cycles has been good to use as a guide or as a potential future road map, but, other tools must always be used for confirmation of any forecasted cycle trends. 

UPDATED FORECAST

- Forecasted cycle tops and bottoms are (+/-)

Bottom August 7th +/-
Top August 12-25 +/-     (This may turn out to be a trading range with a top around Aug12-19 +/- and a bottom around Aug 21 +/- and a final forecasted top around Aug 22-25 +/- all within a possible trading range)
Bottom September 3rd +/-     A special anniversary date and these type of dates are very interesting to watch.

Since cycles  cannot distinguish between trading days and calendar days, the cycle dates may come out on Holidays or weekends.  So the dates suggested that do fall on such days are to be used as a window.   So, as always, other tools must always be used for confirmation of any forecasted cycle trends.  All forecasted dates will still be noted with a "+/-" because the cycle dates are not always as perfect as we would like them to be.  Although they have been pretty accurate.  

  

Intermediate Term forecast 

            UPDATED 

So far the downward pressure of the Intermediate Term Cycles have helped the DJIA drop 700 points so far.

Intermediate term cycles are currently pointing down into August 2014 - September 2014 +/-.   

These cycles will continue to be watched for any possible changes in the forecast.   

 

Several of the current posts have hinted that a drop may be occurring 

June 5th - Barron's Confidence Index vs S&P500

July 8th - Advance Decline Oscillator & Volume Oscillator

July 15th - SPY vs the High Low 10DMA

July 15th - January Barometer

July 17th - Risk On Risk Off

So keep following JustSignals using Twitter or Follow By Email.   

Just submit your email address in the box on the Blog homepage

 

This has been posted for Educational Purposes Only.   Do your own work and consult with Professionals before making any investment decisions. 
Past performance is not indicative of future results

Netflix Chart

Netflix Weekly Chart 

 Courtesy of eSignal

In 2012 the green lines indicate a positive divergence.  While price made a lower low the indicator made a higher low.

In 2014 the green lines indicate a negative divergence.  While price is making higher highs the indicator is making lower highs.

This has been posted for Educational Purposes Only.   Do your own work and consult with Professionals before making any investment decisions. 
Past performance is not indicative of future results.

Short Term Trend Forecast Update

Short Term Trend Forecast Update

The last forecast made on July 8th stated:
" Forecasted cycle tops and bottoms (+/-)

Top        July 12-15 +/-  (The market rallied into the 15th and hung in there until the morning of the 17th and then sold off)

Bottom  July 18-19 +/-   (The market sold off into the 17th and that was the bottom)

Top        July 23 +/-      (The market rallied off the 17th low but did sell off early on the 21st but is rallying off that higher low, so far as of 2PM EST)

Following cycles has been good to use as a guide or potential future road map, but, other tools must always be used to confirm any forecasted cycle trends. 

UPDATE 

Forecasts for cycle tops and bottoms (+/-)

Top   July 23-26 +/-
Bottom August 7th +/-

Since cycles do not distinguish between trading days and calendar days, the cycle dates may come out on Holidays or weekends.  So the dates suggested that do fall on such days are to be used as a window.   So, as always, other tools must always be used to confirm any forecasted cycle trends.  All other days are still noted with a "+/-" because the cycle dates are not always as perfect as we all would like them to be.  Although they have been pretty accurate.  

  

UPDATE in the Intermediate Term forecast 

Intermediate term cycles are currently pointing down into July 2014 - August 2014 +/- and may even extend further out in the 3rd and possibly the 4th quarter 2014.   These cycles will continue to be watched for any possible changes in the forecast.   The market continues to be strong as displayed in the advance decline line and other such indicators.  

 

This has been posted for Educational Purposes Only.   Do your own work and consult with Professionals before making any investment decisions. 
Past performance is not indicative of future results.

RiskOn RiskOff - Where are we now ?

This post is an update to the April 16 ,2014 post

Above chart dated April 16,2014 - courtesy of stockcharts.com
 

Above chart dated July 17,2014 - courtesy of stockcharts.com

JNK - SPDR High Yield Bond ETF
TLH - iShares 10-20 Year Treasury Bond ETF
JNK:TLH is the ratio of the two.  When the ratio is in a confirmed uptrend then it is suggesting a Risk On market.   When the ratio is in a confirmed downtrend then it is suggesting a Risk Off market.   Note what happened in June - August 2011 in the top chart and again in 2012.

As of today, there is still a negative divergence in this chart...
The JNK:TLH chart is not confirming the high in the SPX with a corresponding high in the JNK:TLH chart...  The JNK:TLH high was recorded on or about December 31,2013...

In June it looked as if this indicator was going to reverse to the upside and the red line was going to breach the blue line to the upside, but, in July the JNK:TLH ratio declined below both the red and blue moving averages.

As seen at the top of this blog, maybe it is best said as follows... "Confidence is contagious. So is lack of confidence" -Vince Lombardi


This has been posted for Educational Purposes Only.   Do your own work and consult with Professionals before making any investment decisions.

Past performance is not indicative of future results.

Second Halves Following Flat First Halves

After information about the January Barometer was posted, the following article was noticed on Twitter sent by Jeffrey Hirsch from the Stock Trader's Almanac.  Both of these are theories with their respective probabilities of success.  They may work and they may not.  Please, as always, do your own homework and consult with professionals before making any investment decisions.

Tuesday, July 15, 2014

$DJIA $SPX Second Halves Following Flat First Halves
By Christopher Mistal

Despite the continued generosity of the Fed, an improving labor market and generally solid economic and corporate data, stock market performance in 2014 has been rather lackluster. At the midway point this year DJIA was up a mere 1.5% and S&P 500, a little over 6%. On the heels of a record-setting 2013, this is a particularly meager showing for six months. However, this type of first-half performance is not all that uncommon. In 64 years since 1950, DJIA has been flat (defined as down less than 5% or up less than 5%) 20 times. Within these 20 years, S&P 500 was also flat 15 times.

Click images to view full size…


Following flat first halves, full-month July performance was well above average at 2.1%. In all Julys since 1950, DJIA and S&P 500 averaged gains of 1.2% and 1.0% respectively. However, after July’s surge the market then tended to drift sideways to lower from August through the end of October. At which time a mild fourth quarter rally pulled the market modestly higher.

This has been posted for Educational Purposes Only.   Do your own work and consult with Professionals before making any investment decisions. 

Past performance is not indicative of future results.

SPY vs High Low 10dma

The following charts show divergences...
This needs to be watched...

This has been posted for Educational Purposes Only.   Do your own work and consult with Professionals before making any investment decisions. 

Past performance is not indicative of future results.

2014 January Barometer

January Effect. The stock market has shown an uncanny tendency to end the year higher if prices increase during the month of January, and to end the year with lower prices if prices decline during January. The saying is, "So goes January, so goes the rest of the year." Between 1950 and 1993, the January Effect was correct 38 out of 44 times--an accuracy of 86%.   (An excerpt from marketinout.com)

The following is a detailed chart of January 2014 with the 2014 calendar superimposed below the chart.

The month of January 2014 obviously closed down and that would suggest that 2014 might be a down year, OR, it may suggest a correction at sometime during the year.
The reason this chart was shown in great detail is because, sometimes, the January price pattern may suggest the general price pattern for the year.   Note that this is only a suggestion as nothing is ever written in stone.

Additional information on this topic can be found at the Stock Traders Almanac, as follows.

Friday, January 31, 2014

January Barometer 88.9% Accurate (STA14 Page 16), Almanac Investor Subscribers Emailed Official Results

Dow: 61.9% S&P: 66.7% NAS: 61.9% R1K: 61.9% R2K: 76.2%

"Sell in May and go away. However, no one ever said it was the beginning of the month."
—John L. Person (Professional trader, author, speaker, Commodity Trader's Almanac, nationalfutures.com, 6/19/2009, b. 1961)

$SPX January Barometer Results Are In
By Jeffery A. Hirsch & Christopher Mistal

Devised by Yale Hirsch in 1972 our January Barometer (JB) states that as the S&P 500 goes in January, so goes the year. The indicator has registered only seven major errors since 1950 (all within secular bear markets) for an 89.1% accuracy ratio. Vietnam affected 1966 and 1968; 1982 turned out to be the start of the next secular bull market; two January rate cuts and 9/11 affected 2001; the anticipation of military action in Iraq held down the market in January 2003; 2009 was the beginning of a new bull market following the second worst bear market on record; and the Fed’s second round of quantitative easing likely saved 2010.



Well today’s close makes it official. Ye Olde JB is negative (page 16 STA14). On top of this, DJIA closed below its December closing low of 15,739.43 on January 29 (page 40 STA14). Both are ominous for this nearly 5-year-old bull market. Since 1950, this combination has occurred 21 times with declines going on to average –14.0%. Full-year performance was negative 14 times with all 21 years posting an average loss of –3.2%.

Click image for full size...


This has been posted for Educational Purposes Only.   Do your own work and consult with Professionals before making any investment decisions. 

Past performance is not indicative of future results.

Advance Decline Oscillator & Volume Oscillator

Advance Decline Oscillator

Volume Oscillator

Both of the charts above, the Advance Decline Oscillator and the Volume Oscillator, display rising bottoms.  A red trend line was drawn to connect the rising bottoms in each chart.   The red trend line was violated today on both the Advance Decline Oscillator and the Volume Oscillator.  This is a heads up to watch for a potential turn in the stock market in the days, weeks or months ahead.  Indicators/Oscillators should be watched on monthly, weekly and daily charts for further clues.  The shorter periods will lead the longer periods when a turn occurs.

This has been posted for Educational Purposes Only.   Do your own work and consult with Professionals before making any investment decisions. 
Past performance is not indicative of future results.

Short Term Trend forecast

Short Term Trend forecast Update

The last forecast made on July 3rd stated:
" Forecasted cycle tops and bottoms (+/-)

Top        July 4 +/-  (This forecast worked out very well)

Bottom  July 6 +/-  (This forecast bottom carried over to Monday and then continued on Tuesday as frequently happens when a forecast date falls on a weekend or Holiday)

Top       July 12-15 +/- " 

Following cycles has been good to use as a guide or potential future road map, but, other tools must always be used to confirm any forecasted cycle trends. 

UPDATE 

Forecasted cycle tops and bottoms (+/-)

Top        July 12-15 +/-

Bottom  July 18-19 +/-

Top        July 23 +/-

Since cycles can not distinguish between trading days and calendar days, the cycle dates may come out on Holidays or weekends.  So the dates suggested that do fall on such days are to be used as a window.   So, as always, other tools must always be used to confirm any forecasted cycle trends.  All other days are still noted with a "+/-" because the cycle dates are not always as perfect as we all would like them to be.  Although they have been pretty accurate.  

  

UPDATE in the Intermediate Term forecast 

Intermediate term cycles are currently pointing down into July 2014 - August 2014 +/- and may even extend further out in the 3rd and possibly the 4th quarter 2014.   These cycles will continue to be watched for any possible changes in the forecast.   The market continues to be strong as displayed in the advance decline line and other such indicators. 

This has been posted for Educational Purposes Only.   Do your own work and consult with Professionals before making any investment decisions. 
Past performance is not indicative of future results.

Higher Market Highs ?

What are the odds of still higher market highs?

By Sy Harding of the Street Smart Report
 
Saturday, July 5, 12:40. 
The market plunged in January, and recovered only into a going nowhere sideways trading range for the next three months into May. It then broke out to the upside, stalled a bit, but this week spiked up to another new high.

As a result, the first half of the year, which was looking hesitant if not toppy, has turned out to be quite positive, with the Dow now up 2.9% for the year, and the S&P 500 and Nasdaq up more than 7%.
It accomplished those new highs even with widespread warnings that valuation levels, overbought conditions, investor complacency, public investor participation (stock and fund holdings), margin debt, insider selling, corporate IPO and M&A activity, earnings growth slowing, and a long list of other conditions similar to those seen, not at previous buying opportunities, but at prior significant market tops.
It accomplished the new highs even though the economy has been stumbling, GDP plunging to negative growth of 2.9% in the 1st quarter, and expectations for the second quarter and the full year being revised down, to looking at another year of a sub-par economy, more than five years after the recession ended.
It accomplished those new highs even though the bull market has already doubled since the 2009 low, an exemplary accomplishment for a bull market under any circumstances let alone in an anemic economic recovery.
It accomplished those new highs even though everyone by now must be well aware that this has become the third longest lasting bull market in history, and is without the economic foundation of previous bull markets.

• The 1920’s bull market lasted almost 9 years in the rip-roaring economy of the ‘roaring twenties’ – and then crashed 90%.
• The 1990’s bull market lasted almost ten years in the rip-roaring economy of the 1990’s – and then plunged 50% (the Nasdaq 78%).
• The 2003-2007 bull market lasted five years – and crashed 50% in the 2007-2009 bear market and financial meltdown.

This bull market has now lasted 5.3 years.

It also accomplished these new highs in spite of the S&P 500 now having gone 1,004 days without a normal 10% correction. It’s the longest stretch without a 10% correction since the 1,127 day run from July 1984 to August 1987, 30 years ago – which ended with the 1987 crash, the S&P 500 being down 37%, scaring then also confident investors out of the market for several years.

We all recognize that it was accomplished, at least until the end of last year, by six years of unprecedented government rescue and stimulus efforts.
Yet  it has continued in the first half of this year even though the Fed is withdrawing the stimulus punchbowl, with monthly QE already cut back from $85 billion a month in December to $45 billion, and coming down at a rate of $10 billion a month.
And this year’s continuing positive activity is taking place in the market’s unfavorable season of May to October, and in the usually negative 2nd year of the Four-Year Presidential Cycle.
It can always be different this time in some areas.
As proven in 1999, investors can become even more confident, valuations (p/e ratios, etc.) can become even more extreme.
But the above is a very long list of conditions that would all have to defy the odds.



Use the following link to read the balance of this article

http://bit.ly/TZnbvt

This has been posted for Educational Purposes Only.   Do your own work and consult with Professionals before making any investment decisions. 
Past performance is not indicative of future results.

Short Term Trend Forecast

Short Term Trend forecast Update

The last forecast made on June 25th stated, "So far there is no change in the next forecasted cycle low July 6th +/-      But, cycles indicate that there may be some kind of counter trend action between June 26th and July 4th.".

The counter trend action did happen as the cycle forecast suggested.  

 

Following cycles has been good to use as a guide or potential future road map, but, other tools must always be used to confirm any forecasted cycle trends. 

UPDATE 

Forecasted cycle tops and bottoms (+/-)

Top        July 4 +/-

Bottom  July 6 +/-

Top       July 12-15 +/-

 

Since cycles can not distinguish between trading days and calendar days, the cycle dates may come out on Holidays or weekends.  So the dates suggested that do fall on such days are to be used as a window.   So, as always, other tools must always be used to confirm any forecasted cycle trends.  All other days are still noted with a "+/-" because the cycle dates are not always as perfect as we all would like them to be.  Although they have been pretty accurate.  

  

UPDATE in the Intermediate Term forecast 

Intermediate term cycles are currently pointing down into July 2014 - August 2014 +/- and may even extend further out in the 3rd and possibly the 4th quarter 2014.   These cycles will continue to be watched for any possible changes in the forecast.   The market continues to be strong as displayed in the advance decline line and other such indicators. 

 

 

This has been posted for Educational Purposes Only.   Do your own work and consult with Professionals before making any investment decisions. 
Past performance is not indicative of future results.

S&P 500 and the Death Cross

Courtesy of Yardeni.com

The red trend lines and the question mark were added to this chart.
Note the years where the red trend lines were broken and then bottomed.
Have to comment on the bottom of the first blue line in 1974 even though there was not enough data here to show where the red trend line would have been broken.  An important low.
Then 1981-82, 1987, 1999-2000, 2007.
Now it is staring us in the face again.   Not a question of "if it will happen", but, "when it will happen".
Thank you to Ed Yardeni for this wonderful chart!

This has been posted for Educational Purposes Only.   Do your own work and consult with Professionals before making any investment decisions. 

Past performance is not indicative of future results.

Short Term CIT forecast Update

Wednesday June  25,2014 @ 9:20am

Change in Trend (CIT)  

Short Term CIT forecast Update

The last forecast made on June 13th stated, "So far there is no change in the forecasted cycle lows today, June 13th & July 6th with a bounce in between.  This bounce may find itself ending around June 23rd +/-"

Since June 13th the market bottomed that morning and then rallied to June 23rd +/- as the cycles suggested.  It then proceeded to sell off, and the futures are indicating a lower open this morning.

 

Following cycles has been good to use as a guide or potential future road map, but, other tools must always be used to confirm any forecasted cycle trends.  

 

UPDATE 

 So far there is no change in the next forecasted cycle low July 6th +/-

But, cycles indicate that there may be some kind of counter trend action between June 26th and July 4th.

Since cycles can not distinguish between trading days and calendar days, the cycle dates may come out on Holidays or weekends.  So the dates suggested that do fall on such days are to be used as a window.  All other days are still noted with a "+/-" because the cycle dates are not always as perfect as we all would like them to be.  Although they have been pretty accurate.  

  UPDATE in the Intermediate Term forecast 

Intermediate term cycles are currently pointing down into July 2014 - August 2014 +/- and may even extend further out in the 3rd and possibly the 4th quarter 2014.

So this may prevent some rallies from materializing, but if they do occur, some investors may take advantage of these rallies and sell into them.

We continue to witness this type of action.

This has been posted for Educational Purposes Only.   Do your own work and consult with Professionals before making any investment decisions. 

Past performance is not indicative of future results.

S&P500 daily chart

 

This has been posted for Educational Purposes Only.   Do your own work and consult with Professionals before making any investment decisions. 

Past performance is not indicative of future results.

XAU daily chart

This has been posted for Educational Purposes Only.   Do your own work and consult with Professionals before making any investment decisions. 

Past performance is not indicative of future results.

Short Term CIT forecast Update

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Friday June 13,2014, 11am

Change in Trend (CIT)  

Short Term CIT forecast Update

The last forecast made on May 28th stated, "After May 28th, the next forecasted cycle lows are June 13th & July 6th with a bounce in between."

Since May 28th the market continued its rally to a top on June 9th.  It then proceeded to sell off, so far, to a bottom made this morning, Friday June 13th, at around 10:00am, just as forecasted on May 21st.

Following cycles has been good to use as a guide or potential future road map, but, other tools must always be used to confirm any forecasted cycle trends.  

UPDATE 

 So far there is no change in the forecasted cycle lows today, June 13th & July 6th with a bounce in between.  This bounce may find itself ending around June 23rd +/-

There is no change in the Intermediate Term forecast 

Intermediate term cycles are currently pointing down into July 2014 +/-.

So this may prevent some rallies from materializing, but if they do occur, some investors may take advantage of these rallies and sell into them.

We continue to witness this type of action.

This has been posted for Educational Purposes Only.   Do your own work and consult with Professionals before making any investment decisions. 

Past performance is not indicative of future results.

Barron's Confidence Index vs S&P500

Courtesy of Barron's and eSignal

This has been posted for Educational Purposes Only.   Do your own work and consult with Professionals before making any investment decisions. 

Past performance is not indicative of future results.