Best of the Week
Most Popular
1. Market Decline Will Lead To Pension Collapse, USD Devaluation, And NWO - Raymond_Matison
2.Uber’s Nightmare Has Just Started - Stephen_McBride
3.Stock Market Crash Black Swan Event Set Up Sept 12th? - Brad_Gudgeon
4.GDow Stock Market Trend Forecast Update - Nadeem_Walayat
5.Gold Significant Correction Has Started - Clive_Maund
6.British Pound GBP vs Brexit Chaos Timeline - Nadeem_Walayat
7.Cameco Crash, Uranium Sector Won’t Catch a break - Richard_Mills
8.Recession 2020 Forecast : The New Risks & New Profits Of A Grand Experiment - Dan_Amerman
9.Gold When Global Insanity Prevails - Michael Ballanger
10.UK General Election Forecast 2019 - Betting Market Odds - Nadeem_Walayat
Last 7 days
Gold and Silver - The Two Horsemen - 11th Nov 19
Towards a Diverging BRIC Future - 11th Nov 19
Welcome to the Zombie-land Of Stock Market Investing - 11th Nov 19
Illiquidity & Gold And Silver In The End Game - 11th Nov 19
Key Things You Need to Know When Starting a Business - 11th Nov 19
Stock Market Cycles Peaking - 11th Nov 19
Avoid Emotional Investing in Cryptocurrency - 11th Nov 19
Australian Lithium Mines NOT Viable at Current Prices - 10th Nov 19
The 10 Highest Paying Jobs In Oil & Gas - 10th Nov 19
World's Major Gold Miners Target Copper Porphyries - 10th Nov 19
AMAZON NOVEMBER 2019 BARGAIN PRICES - WD My Book 8TB External Drive for £126 - 10th Nov 19
Gold & Silver to Head Dramatically Higher, Mirroring Palladium - 9th Nov 19
How Do YOU Know the Direction of a Market's Larger Trend? - 9th Nov 19
BEST Amazon SMART Scale To Aid Weight Loss for Christmas 2019 - 9th Nov 19
Why Every Investor Should Invest in Water - 8th Nov 19
Wait… Was That a Bullish Silver Reversal? - 8th Nov 19
Gold, Silver and Copper The 3 Metallic Amigos and the Macro Message - 8th Nov 19
Is China locking up Indonesian Nickel? - 8th Nov 19
Where is the Top for Natural Gas? - 7th Nov 19
Why Fractional Shares Don’t Make Sense - 7th Nov 19
The Fed Is Chasing Its Own Tail; It Doesn’t Care What You Think - 7th Nov 19
China’s path from World’s Factory to World Market - 7th Nov 19
Where Is That Confounded Recession? - 7th Nov 19
FREE eBook - The Investment Strategy that could change your future - 7th Nov 19
Is There a Stock Market Breakout Ahead? - 6th Nov 19
These Indicators Aren’t Putting to an Economic Resurgence - 6th Nov 19
Understanding the Different Types of Travel Insurance - 6th Nov 19
The Biggest Gold Story Of 2020 - 6th Nov 19
Best Money Saving FREE Bonfire Night Fire Works Show Sheffield 2019 - 5th Nov 19
Is the Run on the US Dollar Due to Panic or Greed? - 5th Nov 19
Reasons Why Madrid Attracts Young Professionals - 5th Nov 19
Larger Bullish Move in USD/JPY May Just Be Getting Started - 5th Nov 19
Constructive Action in Gold & Silver Stocks - 5th Nov 19
The Boring Industry That Hands +500% Gains - 5th Nov 19
Stock Market Chartology vs Fundamentals - 4th Nov 19
The Fed’s Policy Is Like Swatting Flies with Nuclear Weapons - 4th Nov 19
Stock Market Warning: US Credit Delinquencies To Skyrocket In Q4 - 4th Nov 19
Stock Market Intermediate Topping Process Continues - 4th Nov 19
Stock Market $SPY Expanded Flat, Déjà Vu All Over Again - 4th Nov 19
How To Buy Gold For $3 An Ounce - 4th Nov 19

Market Oracle FREE Newsletter

How To Buy Gold For $3 An Ounce

Stocks Bear Market Rally Looking Toppy

Stock-Markets / Stocks Bear Market Apr 21, 2010 - 08:22 AM GMT

By: Claus_Vogt

Stock-Markets

Best Financial Markets Analysis ArticleFrom a big-picture perspective, the stock market’s advance off the March 2009 low is nothing more than a huge, bear market rally.

To understand how I come to that conclusion, just look at two classical valuation measures, price-to-earnings ratios and dividend yields, in the chart below. You can easily see how this stock market bear, which started in 2000 at record overvaluations, still has a lot of work to do …


S&P 500, Price Earnings Ratio, and Dividend Yield, 1926 to 2010

S & P Chart

With a price-to-earnings ratio of 23.39 on a twelve-months trailing GAAP earnings basis, valuations are as high as they usually get during an upward cycle.

And the dividend yield is under two percent. That’s way below the three percent threshold, historically indicating an extremely overvalued market.

Meanwhile, Bullish Exuberance Is Back to Dangerous Levels

Do you remember the depressive sentiment during the depth of the crisis in late 2008 and early 2009? It looked like the world was coming to a standstill. Everybody seemed to hate the stock market. Even mainstream economists who tend to be bullish and upbeat all the time showed signs of doubt.

About a year and a half later that picture has changed dramatically!

Bullish forecasts for the economy and the stock market are back in vogue. In fact, Investors Intelligence is telling us that 51.1 percent of stock market advisors are bullish again, back up from less than 25 percent during the fourth quarter of 2008.

Large Cap Index Chart

As shown in the bottom panel of the above chart, the number of financial newsletters leaning bullish is on the rise, too … well above the 2.0 level considered a bullish extreme.

Even more important, though, is the bullishness of mutual fund managers …

The average mutual fund cash level has fallen to a mere 3.5 percent as indicated in the following chart. In hitting that level, this important sentiment indicator has tied the record reached during the summer of 2007.

Mutual Fund Cash Chart

Equity put-call ratios are also falling dramatically, reaching euphoric levels not seen since 2000.

Call Ratio Chart

Conclusion: The Air Is Getting Thin for the Stock Market

The stock market has rallied roughly 80 percent since the March 2009 low bringing valuation metrics back to nose-bleed levels. Money supply growth has tumbled to a trickle, while stock market sentiment is back to euphoric highs.

And we still have to deal with a housing market that’s in shambles, an economy lacking growth momentum, and 9.7 percent unemployment!

All these observations add up to one compelling conclusion: The stock market has entered the last phase of the huge bear market rally off the March 2009 low. And the next few months will probably show the topping phase, the prelude of the next bear market leg.

Best wishes,

Claus

This investment news is brought to you by Money and Markets. Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit http://www.moneyandmarkets.com.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

Jethro114
21 Apr 10, 12:43
Perma Bear

Says Claus_Vogt the perma bear.

The markets going to have to drop a lot for you just to break even!


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules