The Battle of the Bulls and the Bears (video)

By Chris Ciovacco

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What Happened to the Presidential Cycle?

By Tom McClellan

Presidential Cycle Pattern

If this were a “normal” 2nd year of a presidential term, we would now be in a corrective period due to last until just before the mid-term elections.  But as many in the press have noted, we do not have a “normal” presidency, and the market is not tracing out a perfect normal pattern.

Years ago, I first constructed a Presidential Cycle Pattern by averaging together multiple years’ worth of data on the SP500.  One difference I chose to make in this process, versus the work of others, is that I started each year on the anniversary of the November federal elections.

The reason for that difference is that the investing public tends to react right away to the news of whoever gets elected, rather than waiting for January 1st, or January 20th when inauguration takes place.  So we might as well accept the political annual cycle for what it is.

Continue reading What Happened to the Presidential Cycle?

The Charts to Watch in 2018 [Updated]

By Callum Thomas

At the start of the year I posted an article on The Charts to Watch in 2018. It covered some of the key charts and indicators from my 2017 End of Year Special Edition and at the time attracted a lot of interest.  So I thought it would be a good idea to do an almost halfway point update as an eventful 2018 has so far seemingly rushed by.

The format of this article is the same as the original, but I will leave in the exact comments on the charts (in italics and quote marks) for the sake of transparency.  Aside from updating the charts, I have added my updated views and what has changed or become more apparent since then.

But before we get into the charts, here’s a quote from the introduction of original post:

“I’ve said it before and I’ll say it again: 2018 is going to be harder and more complex for investors than 2017.  The cross currents of rising valuations across asset classes, maturing of the business cycle at a global level, and the turning of the tides in monetary policy could make 2018 a watershed year.”

Yep. Sure looks that way!

1. “No more spare capacity in DM. (Next step = Inflation)”
Nothing to add to this.  If anything investors should be paying even more attention to this chart.

Continue reading The Charts to Watch in 2018 [Updated]

Buyback Top or Just Needless Worry?

By Kevin Muir

You had to know that last week’s Barron’s cover was too good for me to pass up. Come’ on. It’s just screaming at me to write a post.

It’s like Lindsay Lohan attending a celebrity vodka launch event – you know no good will come of it, but it will be entertaining, and most likely Lindsay (and myself) will end up making fools of ourselves.

So here I go.

Continue reading Buyback Top or Just Needless Worry?

Global Equity Valuations: Big Changes, But Some Things Stay the Same

By Callum Thomas

The global equity market correction has driven a reset in a number of market metrics such as sentiment (both economic sentiment and investor sentiment), fund flows, positioning, volatility, and of particular interest – valuations.  Yet as much as there has been a minor adjustment in valuations, a couple of things stay the same…

Today’s chart comes from my latest Monthly Chartbook, which presents a compilation of what I think are the key charts to be watching and a summary of views across asset classes.

The chart shows PE10 valuations for the USA, Developed Markets ex-USA, and Emerging Markets.

Continue reading Global Equity Valuations: Big Changes, But Some Things Stay the Same

Two Hands

By Tim Knight

On the one hand, stocks are breaking out of key patterns, such as the small caps pushing above this triangle:

And, to my eyes, a breakout like this – – what’s the word? – – oh, yeah: sucks.

On the other hand, there are some sectors that remain nicely positioned and appear to be turning away from recent strength, such as financials:

We don’t even care, as restless as we are;
We feel the pull in the land of a thousand guilts;
And poured cement, lamented and assured;
To the lights and towns below;
Faster than the speed of sound;
Faster than we thought we’d go, beneath the sound of hope.

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The Fed Model

By Kevin Muir

Way back in 1997, the Federal Reserve surprised the financial community with comments relating to the S&P 500 and interest rates.

“The run-up in stock prices in the spring was bolstered by unexpectedly strong corporate profits for the first quarter. Still, the ratio of prices in the S&P 500 to consensus estimates of earnings over the coming twelve months has risen further from levels that were already unusually high. Changes in this ratio have often been inversely related to changes in long-term Treasury yields, but this year’s stock price gains were not matched by a significant net decline in interest rates. As a result, the yield on ten-year Treasury notes now exceeds the ratio of twelve-month-ahead earnings to prices by the largest amount since 1991, when earnings were depressed by the economic slowdown.”

They even went as far as to include a chart of the S&P 500 earnings-price ratio versus US 10-year Treasury note yield.

Continue reading The Fed Model

It Is What It Is (NFTRH 499 Excerpt)

By NFTRH

Below is NFTRH 499‘s opening segment and the first part of the US Stock Market segment. As for the entire report, here’s what subscriber JF had to say before giving me some of his views on the market. Interactions with NFTRH subscribers, an astute bunch, is a hidden benefit I receive from this service.

“Will write more later when in front of PC, but this is a great report. Fucking absurdly solidly enjoyable thorough and easy to read and ponder. Well done.”

It Is What It Is

We will update charts of US stock indexes and sectors, along with global markets in the report below, as usual. But for this week’s intro segment I want to think about the origin of Biiwii.com’s URL (but it is what it is) because there are echoes of inputs from 2004 in play, which were part of the reason for the name of the website.

Specifically, back in 2003-2004 most people were still bearish in expectation of an ongoing secular bear market to follow the secular bull that had concluded in 2000. Personally, I had been leaning toward a resumption of the bear after the 2003 double (‘W’) bottom and bounce. But at some point in 2004 I realized that it wasn’t happening and that inflation was lifting stocks while it lifted gold, silver and commodities even more. But it was what it was, Alan Greenspan had cooked up new bubbles.

Continue reading It Is What It Is (NFTRH 499 Excerpt)

Bitcoin Still Blazing Trail for Stocks

By Tom McClellan

Bitcoin and SP500
May 11, 2018

Back in January, I introduced readers to the revelation that all throughout 2017, the DJIA had been following in the footsteps of Bitcoin prices, with a lag time of about 8 weeks (56 calendar days).  And it continues working even now, albeit with a slight adjustment.

Why would this relationship work?  My answer is that there are cycles of human emotion which affect our collective attraction to and repulsion from speculative investments like the stock market.  It appears that those same cycles of trader emotion are at work on Bitcoin traders, who are feeling those surges and lags in enthusiasm before they reach the hearts of stock investors.

Continue reading Bitcoin Still Blazing Trail for Stocks

A Historical Look at Employment Days

By Rob Hanna

Friday the employment report will be released about an hour before the NYSE open. Employment days have an interesting history and they have contributed to some worthwhile studies over the years. Below is a chart of SPX performance on Employment Days going back to 1993.

2018-05-04

What I find interesting about the chart is that Employment Days have shown such streaky performance – and the streaks lasted a long time. While it’s a bit unusual to see such abrupt changes in market dynamics, it does serve as a nice reminder that such changes are always possible. And with two of the last three employment days seeing a 2% decline in the SPX, perhaps dynamics may be changing again. I will note that employment days are often volatile, and that has been especially true in 2018. The 4 employment days in 2018 have posted the following results: +0.7%, -2.1%, +1.7%, -2.2%. In other words, it has been a market mover.  Be ready.

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Will Rising Bond Yields Send Stock Prices Tumbling?

By Elliott Wave International

Conventional Wall Street wisdom says “rising rates are bad for stocks.” Let’s put that belief to a test.

One of the big financial news stories on April 24 was that the 10-year Treasury yield hit 3% for the first time since 2014.

The other big financial news story was that the DJIA closed 424 points lower on that day.

As you probably know, the conventional wisdom on Wall Street is that investors will sell stocks in favor of bonds when yields reach an attractive level. So, it’s not surprising that many pundits blamed the DJIA’s triple-digit decline on rising bond yields.

Here’s a sample April 24 headline along with higher bond yield warnings from the past few months:

  • Here’s the threat to the stock market from rising bond yields (Marketwatch, April 24)
  • Rising bond yields could win next round in battle with stock market (CNBC, Feb. 7)
  • How Spiking Bond Yields Could Topple a Stock Market Rally (Bloomberg, Feb. 4)

But, is the conventional wisdom that says higher bond yields will send stocks lower correct?

Well, our research reveals that there is no consistent correlation between interest rates or bond yields and the stock market.

Take a look at these charts from Robert Prechter’s 2017 book, The Socionomic Theory of Finance:

Continue reading Will Rising Bond Yields Send Stock Prices Tumbling?

A Look at Fed Days from 1982 to Present

By Rob Hanna

On Wednesday the Fed will conclude its policy meeting and announce any changes. This happens 8 times per year. I have long referred to these days as “Fed Days”. Fed Days have a long history of having a bullish tendency. This can be seen in the chart below, which shows Fed Day performance back to 1982.

2018-05-01F

Of course not all Fed Days are created equal. To learn more about Fed Days, and where the strongest edges lie, I’d encourage you to check out the collection of Fed Day studies here on the blog, or read The Quantifiable Edges Guide to Fed Days.

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