The End of the Incessant U.S. Bid?

By Kevin Muir

It’s not getting much airplay, but on Friday, a rather important factor to the incessant U.S. financial asset bid expired.

According to Bloomberg’s Brian Chappatta, Friday was the last day U.S. corporations could deduct pension contributions at the 2017 corporate tax rate of 35 percent and will now only be eligible for the new 21 percent rate.

There has been considerable debate amongst the fixed-income community regarding the amount of curve flattening that has been the direct result of corporations accelerating their pension contributions. In fact, Brian’s article is named, “The Yield Curve’s Day of Reckoning is Overblown” and is mostly a rebuke of the idea that this factor has been the driving force to the recent flattening.

Continue reading The End of the Incessant U.S. Bid?

S&P 500 vs. Fund Flows – Divergence

By Callum Thomas

A curious divergence has opened up between the level of the S&P500 and the cumulative level of fund flows into US equity funds (mutual funds and ETFs).  The last time in recent history that we saw a similar type of divergence was in the wake of the 2015/16 twin corrections where fund flows tapered off and then after the election it was game on.  So the open question is whether this divergence in flows vs price will be followed by a similar type of ‘onwards and upwards’.  The counter argument might be that this is actually smart money flows… and a second correction is imminent.  Either way, it’s clear that investors are *not* throwing caution to the wind.

Continue reading S&P 500 vs. Fund Flows – Divergence

There Will Be Warnings!

By Steve Saville

[This blog post is a slightly-modified excerpt from a TSI commentary published about three weeks ago. Not much has changed in the meantime.]

If you rely on the mainstream financial press for your information then you could be forgiven for believing that financial crises happen with no warning. However, there are always warnings if you know where to look.

Here are four leading indicators of financial stress and/or economic confidence that are both easy to monitor and worth monitoring. It’s likely that all four of these indicators will issue timely warnings prior to the next financial crisis and a virtual certainty that at least two of them will.

1) The yield curve, as depicted on the following chart by the 10yr-2yr yield spread.

As explained in many previous commentaries, the yield curve ‘flattening’ to an extreme and then beginning to steepen warns that an inflation-fueled boom has begun to unravel. For example, the yield curve reached its maximum ‘flatness’ in November-2006 and provided clear evidence of a reversal in June-2007. That was the financial crisis warning. By August of 2007 the ‘steepening’ trend was accelerating.

Continue reading There Will Be Warnings!

Semper Fidelis

By Tim Knight

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Or better yet, subscribe to NFTRH Premium for an in-depth weekly market report, interim updates and NFTRH+ chart and trade ideas to get even more bang for your buck. You can also keep up to date with plenty of actionable public content at by using the email form on the right sidebar. Or follow via Twitter @BiiwiiNFTRH, StockTwits or RSS. Also check out the quality market writers at

Our Extremely Split Market & What That Has Meant Historically

By Rob Hanna

One indicator that has gotten some play in the news lately is the Hindenburg Omen. In last weekend’s subscriber letter I discussed the Hindenburg Omen signal in detail. (Click here for a free trial.) A core premise behind the Hindenburg Omen is that there are a large number of stocks hitting both new highs and new lows. This indicates a split market. When this has happened for multiple days within a short time period, it has often led to market declines. Friday marked the 9th day in a row that NYSE new highs and new lows both exceeded 2.4% of total issues traded. The study below is from the Thursday night subscriber letter, and it looked at streaks of 8 days or more. (I’ll note I also took a quick look this weekend at streaks of 9 days, rather than 8. It barely changed anything.)

… But tonight I simply wanted to look at streaks of these type of split market conditions on their own. With data going back to 1970, I looked for other instances of 8 consecutive days with both new highs and new lows exceeding 2.4% of total issues. Results are below.


There have not been many instances, but the returns after the ones so far have been quite bearish. Below is a list of all the instances assuming a 25-day holding period.

Continue reading Our Extremely Split Market & What That Has Meant Historically

Pieces of the US & Global Stock Market Puzzle Come Together


This article is edited slightly from the original to clean up some wording and make points a little clearer.

All through the summer NFTRH had a “top-test” view on the primary US stock index, the S&P 500. We were 100% right on that; SPX spent all summer grinding upward to that test.

That is where the would-be market genius aspect of the analysis ends because it appears that the favored outcome of that test – that it would fail into a correction – will be negated in favor of the alternative outcome, which we have also carried forward. That outcome is a continuation with a measured target of SPX 3000+. So the favored and alternate views have traded places. The alternate now being that the bullish state of things is one big, post-Labor Day bull trap.

Continue reading Pieces of the US & Global Stock Market Puzzle Come Together

Does Currency Hedging Reduce Volatility?

By Charlie Bilello

“Currency adds volatility – and that can be costly.” – Sales Pitch

One of the main selling points for hedging currency exposure in foreign equities is a reduction in volatility.

The argument typically goes as follows: as a U.S. investor, why take on additional currency volatility if you don’t have to? Simply hedge the foreign currency exposure, leaving you with just the equities, a lower volatility exposure.

On the face of it, this seems to make perfect sense. Currencies have volatility, and so adding them to the risk equation would appear to make an investment more volatile (equity volatility + currency volatility = more volatility). But is this actually the case? Let’s take a look…

The oldest and largest currency hedged ETF is the WisdomTree Japan Hedge Equity ETF (DXJ), with assets under management of over $5 billion. Since its inception in June 2006, DXJ has an annualized volatility of 22.9% versus 21.6% for EWJ (the unhedged iShares MSCI Japan ETF).

Continue reading Does Currency Hedging Reduce Volatility?

Everybody’s (Not) Talkin’

By Tim Knight

Once again, after a tiny, tiny dip in the market, everybody’s talking about a push higher. S&P 3000 is offered as a foregone conclusion. Indeed, even to this poor old bear, I can see an argument to be made for a bounce at current levels:

Yet something has been developing recently which I’ve been watching all year long. Indeed, my Gold and Diamond members know that I’ve been sort of obsessed with what I’ve been calling the Most Important Chart Ever, which has been slowly but surely forming precisely as I hoped.

Continue reading Everybody’s (Not) Talkin’

Simple And Powerful Stock Market Charts

By Chris Ciovacco

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Or better yet, subscribe to NFTRH Premium for an in-depth weekly market report, interim updates and NFTRH+ chart and trade ideas to get even more bang for your buck. You can also keep up to date with plenty of actionable public content at by using the email form on the right sidebar. Or follow via Twitter @BiiwiiNFTRH, StockTwits or RSS. Also check out the quality market writers at

Approaching the 10-Year Anniversary

By Doug Noland

We’re rapidly Approaching the 10-year Anniversary of the 2008 financial crisis. Exactly one decade ago to the day (September 7, 2008), Fannie Mae and Freddie Mac were placed into government receivership. And for at least a decade, there has been nothing more than talk of reforming the government-sponsored-enterprises.

It’s worth noting that total GSE (MBS and debt) Securities ended Q3 2008 at $8.070 TN, having about doubled from year 2000. The government agencies were integral to the mortgage finance Bubble – fundamental to liquidity excess, pricing distortions (finance and housing), general financial market misperceptions and the misallocation of resources. GSE Securities did contract post-crisis, reaching a low of $7.544 TN during Q1 2012. Since then, with crisis memories fading and new priorities appearing, GSE Securities expanded $1.341 TN to a record $8.874 TN. Of that growth, $970 billion has come during the past three years, as financial markets boomed and the economy gathered momentum. A lesson not learned.

Continue reading Approaching the 10-Year Anniversary

Do Stocks Perform Better When Manufacturing Is Booming?

By Charlie Bilello

US manufacturing is booming.

In a report released this week, the ISM Manufacturing Index moved up to 61.3, the second-highest level in the last 30 years.

Data Source for all charts/tables herein: FRED, Bloomberg

Many are saying that’s great news for the stock market because increased manufacturing activity is evidence of a stronger economy. This seems logical but does the data support such a conclusion? And is it prudent to use manufacturing indicators to time your exposure to stocks.

Let’s take a look…

Continue reading Do Stocks Perform Better When Manufacturing Is Booming?

Deja Voodoo, 1994 Edition

By Tom McClellan

1994 SP500 Analog
August 30, 2018

In the election of 1992 there was an insurgent candidate, who did not win a majority of the popular vote, but who took the White House and set about reorganizing the government in a manner more to his liking.  The first two years of his term in office were marked by numerous scandals, and by a stock market which saw a scary dip in the 2nd year which eventually resolved itself into a strong uptrend during the 3rd year of his presidential term.  At that time, the Federal Reserve was commencing a program of rate hikes, which had market participants worried.

Does this sound familiar?

Continue reading Deja Voodoo, 1994 Edition