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Seasonal Inflection Point Has Moved Earlier

weekly Chart In Focus

Just over a year ago, I wrote here about how annual seasonality has undergone a change versus how it used to act years ago.  We all know about how November to April is the strong period for seasonality, and then we are supposed to “Sell in May and go away”.  That was based on how things used to go, when the stock market would typically make a bottom in late October and then start higher.

In recent years, though, the seasonal inflection point has been creeping to an earlier point on the... Read More

AAII Survey Shows Sentiment Washout

weekly Chart In Focus

The American Association of Individual Investors (AAII) releases its weekly survey of its members’ every Thursday, and this week shows a pretty big spread between the bulls (21%) and the bears (39%).  Another 39% of participants are “neutral”, and not willing to make a commitment about their opinion, and that’s actually a pretty high reading for the “neutrals”.

When investors shift over to saying that they are bearish in a pretty big way, it is usually a good marker for an intermediate term... Read More

Yield Curve and Small Caps

weekly Chart In Focus

Back on August 22, I wrote here about how the spread between the 10-year T-Note yield and the 3-month T-Bill yield gives us a leading indication that is relevant for small cap relative performance.  This time, I look at the "yield curve" in a different way, via the spread between 10-year and 2-year yields.

The 10-year to 3-month spread is a leading relationship for small cap relative performance, but the 10-2 spread is a coincident one.  Sometimes analysts show that as a 2-10 spread, but it... Read More

Trump Thinks He Wants Low Rates Like Europe, But Be Careful What You Ask For

weekly Chart In Focus

President Trump has been articulating his wish on Twitter and elsewhere that the U.S. have interest rates as low as other countries.  That’s an understandable wish, as no one likes to pay more than the other guy is paying for something.

Trump interest rate tweets

In economics there are often unintended side effects, and that is what this week’s chart is intended to explore.  It shows the spread between the 10-year U.S. Treasury Note and the 10-year German Bund.  That spread is pretty high right now, with U.S.... Read More

Bond Yields Stretched Far From Oil’s Message

weekly Chart In Focus

Back on July 10, I wrote in a Chart In Focus article that there was an “Upturn Ahead for T-Bond Yields”.  And we got a small upturn then.  But that small upturn in yields was more than eclipsed by a huge drop in bond yields to historic lows, as U.S. yields were affected by the rest of the world’s bond markets going mad. 

Several countries’ sovereign debt instruments are trading at negative yields, meaning you pay for the privilege of someone else holding your money for you for years.  And... Read More

Crude Oil’s 10-Year Message

weekly Chart In Focus

We currently have trade wars, presidential tweets, inversions in the yield curve, slowing earnings growth, decreasing corporate share buy-backs, and all manner of other problems affecting the stock market.  And yet the long term message from crude oil prices says that the stock market ought to continue trending upward into 2021.

It is a fun attribute of crude oil prices that their movements give us a 10-year leading indication of what lies ahead for the stock market.  I discovered this... Read More

Inverted Yield Curve, and Small Caps

weekly Chart In Focus

The whole media world is abuzz lately with talk of the inversion in the yield curve, and what it means for a potential recession.  The track record is mixed there, and there is much debate among academics about whether it is “different this time”.  But there is one very reliable effect associated with yield curve fluctuations which we can talk about.

In the chart above, I’m showing the relative strength ratio for the Russell 2000 Index versus the Russell 1000.  Also in the chart is the... Read More