Extremely Rare Long-Term Setups For Stocks 1928-2017

December 15, 2017

After you click play, use the button in the lower-right corner of the video player to view in full-screen mode. Hit Esc to exit full-screen mode.

Video

Video

Fed Rate Hike History Says Bulls Could Run For A Long Time

December 13, 2017

Facts Say Be Open To Better Than Expected Outcomes

Dating back to August 2016, our weekly videos have covered numerous long-term charts that tell us to remain open to the possibility of stocks rising for several more years, including:

  1. Bullish Monthly Momentum (MACD) - December 2, 2016
  2. Long-Term Breakout In Stock/Bond Ratio - December 9, 2016
  3. Annual Signal Last Seen Before 1982 Bull Run - December 30, 2016.

Are Fed Rate Hikes A Showstopper For Stocks?

The Fed raised rates by 0.25% Wednesday and projected an acceleration in U.S. economic growth. It seems tempting to say “the Fed will kill the bull market”. However, as noted by Senior Market Strategist Ryan Detrick of LPL Financial, it is in the realm of historical possibility for stocks to continue to rise for some time.

A List Of Concerns

This week’s stock market video reviews present day facts to help us better understand the stock market’s concerns related to:

  1. Valuations
  2. Geopolitical Events
  3. Predictions Of Gloom And Doom
  4. Threat Of U.S. Recession

After you click play, use the button in the lower-right corner of the video player to view in full-screen mode. Hit Esc to exit full-screen mode.

Video

Video

Is The Market Concerned About…?

December 8, 2017

After you click play, use the button in the lower-right corner of the video player to view in full-screen mode. Hit Esc to exit full-screen mode.

Video

Video

Is Volume/Breadth Aligned With Bullish Case?

December 5, 2017

An August 2016 analysis outlined a long-term bullish signal for stocks that has occurred only ten other times in the last thirty-five years. If we fast forward to December 2017, is market breadth/volume aligning with or contradicting bullish data we have in hand?

The chart below shows up/down volume (1996-2010) for the NYSE Composite Stock Index, along with its 50-week moving average (thick blue line).

Notice how all-things-being equal, the probability of bad things happening increases when the 50-week moving average is flat or negative (see orange and red arrows below). Conversely, the probability of good things happening increases when the 50-week moving average turns back up in a bullish manner (see green arrows below). The S&P 500 is shown at the bottom of the image below for reference purposes.

Trend Flipped In Favor Of The Bulls In 2016

In simplified terms, volume patterns shifted from favoring declining issues in early 2016 to favoring rising issues in the second half of 2016 (see green arrow below).

Is The Bullish Bias Still In Play?

As shown in the chart below, the slope of the 50-week moving average still favors good things happening over bad things happening looking out weeks, months, and years. The chart below is dated December 5, 2017.

What Can We Learn From Eight Monthly Charts?

This week’s stock market video looks at numerous monthly charts to see if they align with or contradict the bullish case. The video covers facts rather than opinions or fears of what may or may not happen in the future. The video covers the following:

  1. S&P 500 vs. Bonds
  2. Financials vs. S&P 500
  3. Tech Stocks
  4. Tech Stocks vs. Bonds
  5. Industrial Stocks vs. Bonds
  6. NYSE Composite
  7. Homebuilders
  8. Small Caps vs. S&P 500

After you click play, use the button in the lower-right corner of the video player to view in full-screen mode. Hit Esc to exit full-screen mode.

Video

Video

A Foolproof Signal?

Since there is no such thing as a foolproof indicator or signal in the financial markets, the recent bullish shift in up/down volume assists us with probabilities. As long as the slope of the 50-week remains positive, the odds of good things happening will be higher.

Long-Term Means Long-Term

The facts covered above relate to longer-term outcomes, meaning weeks, months, and years. For this data to be used effectively, we must have realistic expectations about normal volatility within the context of a rising trend.

Are Monthly Charts Starting To Show Some Cracks?

December 1, 2017

After you click play, use the button in the lower-right corner of the video player to view in full-screen mode. Hit Esc to exit full-screen mode.

Video

Video

The Big Picture In Three Charts

November 27, 2017

Average Stock Breakout

Since it is an equally-weighted and broad index, the Value Line Geometric Index is a good way to monitor the average stock. As shown in the chart below, a very long-term and bullish breakout occurred recently.

Stocks Break Out Versus Bonds

There is nothing in the stock/bond chart below that contradicts the bullish narrative told by the Value Line Geometric Index. The stock/bond ratio remains above an area that acted as resistance in 2015.

A Different Story From Longer-Term Charts?

This week’s stock market video reviews very long-term stock/bond and stock/gold charts to see what we can learn about the sustainability of bullish trends in the S&P 500. The video examines the odds of both bonds and gold providing disappointing returns relative to stocks in the coming 3 to 20 years.

After you click play, use the button in the lower-right corner of the video player to view in full-screen mode. Hit Esc to exit full-screen mode.

Video

Video

Stocks Break Out Versus Gold

There is nothing in the stock/gold chart below that contradicts the bullish narrative told by the Value Line Geometric Index. The stock/gold ratio remains above an area that acted as resistance in 2015.

Extremely Rare Stock vs. Bond Set-Up

November 24, 2017

After you click play, use the button in the lower-right corner of the video player to view in full-screen mode. Hit Esc to exit full-screen mode.

Video

Video

Did Market Breadth Confirm The New Highs In Stocks?

November 22, 2017

Bad Breadth Can Foreshadow Bear Markets

Market breadth speaks to the number of stocks participating in an advance. Strong market breadth means a high percentage of stocks are making new highs as the major indexes make new highs. Strong breadth also aligns with widespread confidence in stocks and the economy.

Bearish Divergence In 2000

The chart below tracks the number of NYSE stocks making new highs minus the number making new lows. A bearish divergence was clearly evident well before the bull market peaked in March 2000.

Bearish Divergence In 2007

NYSE New Highs - New Lows ($NYHL) also failed to confirm the S&P 500’s new high in October 2007, telling us many stocks were already showing signs of weakness before the major averages peaked.

New Highs In 2017

How does breadth look as of November 21, 2017? Instead of a bearish divergence, $NYHL printed a new high as the S&P 500, NASDAQ, and Dow printed new highs. The current rally has broad participation from both sector and market capitalization (small, mid, large cap) perspectives. Instead of waving yellow flags as it did in both 2000 and 2007, $NYHL is telling us to be open to more upside in the major averages.

What Can We Learn From Asset Class Behavior?

Is asset class behavior confirming or contradicting the long-term charts covered in recent weeks? Are risk-on/risk-off ratios waving yellow flags in 2017? How do charts of numerous ETFs look today compared to 2007-2008? These questions are addressed in this week’s stock market video.

ETFs covered include tech (QQQ), bonds (TLT), large-cap growth (IWF), intermediate-term Treasuries (IEF), homebuilders (ITB), the VIX (VXX), consumer staples (XLP), the S&P 500 (SPY), gold (GLD), gold miners (GDX), semiconductors (SMH), silver (SLV), industrials (XLI), diversified bonds (AGG), internet stocks (FDN), the Yen (FXY), and Swiss Franc (FXF).

After you click play, use the button in the lower-right corner of the video player to view in full-screen mode. Hit Esc to exit full-screen mode.

Video

Video

How Does Breadth Help Us?

Like any chart or indicator, $NYHL helps us assess the probability of good things happening relative to the probability of bad things happening. The probability of bad things happening never drops to zero. Market breadth in 2017 leans toward the “good things happening” end of the spectrum looking out weeks, months, and years.

What Can We Learn From Asset Class Behavior?

November 17, 2017

After you click play, use the button in the lower-right corner of the video player to view in full-screen mode. Hit Esc to exit full-screen mode.

Video

Video

Tech Stocks: 2017 Looks Nothing Like 2000

November 13, 2017

Bubbles Speak To Unsustainable Trends

It may be surprising to some the NASDAQ made zero progress over a 6,083 calendar-day period between March 10, 2000 and November 3, 2016. The NASDAQ closed at 5,048 when the dot-com bubble peaked in 2000. Fast-forward 16.66 years and we find the NASDAQ closed at 5,046 (two points below the 2000 peak) on November 3, 2016.

An index that makes no progress over a 6,083-day period does not sound like an index in a bubble.

How Do The Last 16.66 Years Of The 2000 Bubble Compare?

The 0% gain that occurred between 2000 and 2016 does not sound like an unsustainable bullish trend or euphoric gains. In fact, a 0% gain is quite a bit different from the “this time is different” 1,513% gain that occurred during the 16.66 years leading up to the bursting of the dot-com bubble.

This Signal Has Only Occurred Two Times In The Last 60 Years

If we examine annual charts for the S&P 500 dating back to the 1950s, will we find what appears to be a major topping process or will we find something much more constructive? The answer can be found in this week’s stock market video.

After you click play, use the button in the lower-right corner of the video player to view in full-screen mode. Hit Esc to exit full-screen mode.

Video

Video

Tech 2017: Impressive Earnings Growth

During the latter stages of the dot-com bubble, actual earnings took a back seat to hype about the “this changes everything” Internet. The Internet has ushered in numerous economic shifts, but companies still need to see some real revenue along the way. The 2017-18 stats below were compiled by Goldman Sachs and appeared in a recent Bloomberg story:

  1. The FAAMG group [Facebook(FB), Apple (AAPL), Amazon (AMZN), Microsoft (MSFT), Google (GOOGL)] saw collective sales expanding 21 percent in the third quarter, the fastest pace in more than five years and three times the growth rate in S&P 500 revenue.
  2. Tech strength is not limited to just FAAMG. Overall industry profit grew 22%, beating all other sectors except for energy.
  3. More than 80 percent of tech firms beat earnings estimates by more than one standard deviation, the best performance in at least 19 years; Apple, Microsoft, Facebook and Google accounted for half of the S&P 500’s index-level surprise.
  4. Tech profit margins expanded by 72 basis points, countering a decline expected by analysts.
  5. FAAMG growth supremacy will continue in 2018, with sales seen increasing 20 percent, versus 11 percent for S&P 500.
  6. Thanks to solid earnings, FAAMG valuations aren’t particularly out of whack with history, even with their outsize returns. The group’s enterprise value sits at 4.9 times sales, versus 2.3 for the S&P 500, in line with the 10-year average, data from Goldman showed.