Pull the trigger with confidence.

With rising worries about September’s bad reputation for the stock market, and with a small drawdown in stock prices, investors seem to have suddenly turned a lot more bearish.  That bearishness constitutes fuel for sustaining an uptrend, as all of those bears will turn into buyers as they flip back to a less bearish stance.

This week’s chart shows data from the AAII’s weekly survey of its members.  The raw data are available at http://www.aaii.com/files/surveys/sentiment.xls.  Some... Read More

High yield corporate bonds (AKA junk bonds) trade more like the stock market than like T-Bonds.  They are considered to be more subject to default risk, and thus to the forces of financial market liquidity that drive the stock market up and down.  That liquidity is the important factor, and thus the HY bonds can give us another viewpoint into understanding the health of the liquidity stream. 

Just a few weeks ago, there developed a troubling divergence between the HY Bond A-D Line and the... Read More

Analysts use seasonal patterns quite frequently these days.  More computing power and more data makes the task a lot easier.  But what most of them miss is that not everything operates with annual seasonality.  Gold, for example, has a 13-1/2 month cycle, so any appearance of seasonal behavior is just coincidental, and transitory.

What they also miss is that the market can sometimes deviate just slightly from its normal seasonal behavior, while at the same time fulfilling it.  This week’s... Read More

When last I wrote here about the NYSE Advance-Decline (A-D) Line in March 2021, there had just been a little divergence which had resolved itself by the A-D Line moving to a higher high.  That’s one of the points about such divergences; they can be rehabiltated, and when they are that is a really bullish sign. 

Now we are seeing another bearish divergence that has developed at the right end of the chart, and so far this one has not yet been rehabilitated.  It still could be, but for the... Read More

There have been “breadth divergences” galore piling up recently, and there are lots of ways to measure or depict that.  Among these is the indicator shown in this week’s chart, which measures the number of stocks in the Nasdaq 100 Index (NDX) which are above their own 100-day moving averages. 

In the energetic part of a new uptrend, it is normal to see this measure jump up to a really high level.  Then as the uptrend ages, the component stocks start getting tired before the final index... Read More

Gold analysts have long “known” that the real interest rates have an effect on gold prices.  By “real” interest rates, I am referring to the inflation adjusted interest rates, which in this week’s chart is represented by the 3-month T-Bill yield minus the CPI Inflation rate.  The current T-Bill yield is +0.05 (hey, at least it is a positive number), and the latest CPI data show prices up 5.37% from a year ago.  So the difference between those two is -5.32%.

Gold was first traded freely in... Read More

Low taxes are a big stimulus to economic activity.  Everyone knows that.  Curiously, not everyone understands that high taxes are a giant restriction on the economy. 

This week’s chart helps to offer evidence of that latter point.  We have several decades of history to show us that jacking up tax collections to too high of a portion of GDP is a big restriction on the economy, so much so that it tends to snuff out economic activity.  18% appears to be the magic number, since every time that... Read More

A big selloff on Monday, July 19, 2021 brought a big sentiment reality check for a lot of investors who were glad to part company with their stocks on a day that saw the DJIA fall by 726 points.  Then they got the chance to regret that decision the next day, when prices rallied back and recovered most of those losses.

There is nothing like price movement to affect sentiment.  In this case, we can see the effect on sentiment by looking at the Investors Intelligence survey data, just out late... Read More