Pull the trigger with confidence.

The stock market’s quick selloff on August 10, 2017 came as traders got reintroduced to the concept of “event risk” after a long period of extreme quiet.  And like bad drivers during the first snowfall of winter, there was a lot of relearning going on about how the market works.

The CBOE Volatility Index VIX shot up to 16.04, after having closed below 10 just 3 days before.  And that led ETF traders to go wild with all of the VIX-related products.  VXX is perhaps the best known of these,... Read More

Everyone has heard the old saying about “Sell in May and go away,” but history shows that the period of seasonal strength actually ends around August 1. But it is tougher to come up with a catchy rhyming phrase for that.  The question for this year, with such a strong market, is whether the normal seasonal weakness of August and September are really going to matter. Or will the market just power on through?

The Annual Seasonal Pattern shown in this week’s chart is made by chopping up... Read More

With the VIX Index down in the 9s, and with valuations at historic extremes, investors are wondering how long this all can last.  The short answer is, MORE. 

The VIX Index made its all-time closing low of 9.31 back on Dec. 22, 1993.  It has posted intraday values below that number in July 2017, but has not yet made a lower closing low.  The most important point that history teaches us about these extreme low VIX readings is that the lowest VIX closing value seldom coincides with the highest... Read More

There is a 60-year cycle in bond yields which has existed since bonds first came about in the 1700s.  It says that bond yields should have ideally bottomed in 2010, and by now we should be well into a 30-year rise in yields lasting until 2040. 

But that is not how it has worked out.  Bond yields have stayed low 7 years beyond the ideal bottom date.  So is something wrong, or is the cycle broken?  Or perhaps is this just an normal sort of anomaly?

We have seen prior examples of bond yields... Read More

It is by now an overused phrase to say that we are in a different sort of presidency right now.  And befitting that theme, we are seeing a really different sort of behavior of the market relative to the Presidential Cycle Pattern.

This week’s chart shows a version of our Presidential Cycle Pattern that is constructed by averaging together the stock market’s performance only in periods when there is a new president from a different party than the last one.  We have found that the market’s... Read More

To paraphrase Wolfgang Pauli, the whole idea behind the Phillips Curve is “not even wrong”. 

A.W.H. Phillips studied the relationship between inflation and unemployment in the United Kingdom, and noticed that they were usually moving in opposite directions.  He therefore theorized that when unemployment is low (and it is hard to find workers), prices of things rise because employers have to pay more to hire qualified employees.  That led 2-3 generations of economists to undertake an effort... Read More

The 28-year record high spread between 10-year T-Notes and German 10-year “bunds” is finally starting to narrow just a bit.  This is a warning that the great bull market in stock prices from the 2009 low is in its last stages.  But it is not done yet.

Ever since June 2009, the yield on the US 10-year T-Note has been higher than its German counterpart.  It turns out that this is a pretty bullish condition, at least for as long as the spread between the two is rising.  As a bull market ages,... Read More

A quiet market is one of the hallmarks of a price top, when no one seems to care enough about risk to move the market very much in either direction.  The NYSE’s McClellan A-D Oscillator has recently been displaying some of that quietness, trading only a few points above and below zero until just the past couple of days.  That quietness in Oscillator readings is telling us something about that very complacency I was talking about.

So to look at it more quantitatively, this week’s chart looks... Read More