Best of the Week
Most Popular
1.U.S. Inner City Turmoil and Other Crises: Ron Pauls Predictions for 2015 - Dr_Ron_Paul
2. What’s In Store For Gold Price in 2015? - Ben Kramer-Miller
3.Crude Oil Price Ten Year Forecast to 2025: Importers Set to Receive a $600 Billion Refund - Andrew_Butter
4.Je ne suis pas Charlie - I am not Charlie - Nadeem_Walayat
5.The New Normal for Oil? - Marin_Katusa
6.Will Collapse in Oil Price Cause a Stock Market Crash? - OilPrice.com
7.UK CPI Inflation Smoke and Mirrors Deflation Warning, Inflation Mega-trend is Exponential - Nadeem_Walayat
8.Winter Storms Snow and Wind Tree Damage Dangers, DIY Pruning - Nadeem_Walayat
9.Oil Price Crash and SNP Independent Scotland Economic Collapse Bankruptcy - Nadeem_Walayat
10.U.S. Housing Market Bubble 2.0 Meet the Pin - James_Quinn
Last 5 days
Ron Paul on U.S. Fed, Central Bankers Monetary Psychopaths - 29th Jan 15
Why Microsoft Stock Will Provide Major Investing Returns - 29th Jan 15
Exploring the Clash Within Civilizations - Mind the Gap - 29th Jan 15
Saudi Arabia Changes Kings, But Not its Oil Policy - 29th Jan 15
Crude Oil Price Bulls vs. Resistance Zone - 28th Jan 15
Acceleration Of Events With Rising Chaos – US Dollar Death Foretold - 28th Jan 15
The Fed and ECB Take the West back to when the Rich Owned Everything - 28th Jan 15
Washington's War on Russia - 28th Jan 15
Cyber War Poses Risks To Banks and Deposits - 28th Jan 15
Lies And Deception In Ukraine's Energy Sector - 28th Jan 15
EUR, AUD, GBP USD – Invalidation of Breakdown - 28th Jan 15
“Backup-Camera Envy” Is Driving This Unstoppaple Investment Trend - 28th Jan 15
The Great "inflated" Expectations for Gold, Oil, Commodities -- and Now Stocks - 28th Jan 15
How to Find the Best Offshore Banks - 28th Jan 15
There’s More to the Gold Price Rally Than European Market Fears - 28th Jan 15
Bitcoin Price Tense Days Ahead - 27th Jan 15
The Most Overlooked “Buy” Signal in the Stock Market - 27th Jan 15
Gold's Time Has Come - 27th Jan 15
France America And Religious Terror War - 27th Jan 15
The New Drivers of Europe's Geopolitics - 27th Jan 15
Gold And Silver - Around The FX World In Charts - 27th Jan 15
It’s Not The Greeks Who Failed, It’s The EU - 27th Jan 15
Gold and Silver Stocks Investing Basics - 27th Jan 15
Stock Market Test of Strength - 26th Jan 15
Is the Gold Price Rally Over? - 26th Jan 15
ECB QE Action - Canary’s Alive & Well - 26th Jan 15
Possible Stock Market Pop-n-drop in Store For SPX - 26th Jan 15
Risk of New Debt Crisis After Syriza Victory In Greece - 26th Jan 15
How Eurozone QE Works: A Guide to Draghi's News - 26th Jan 15
Comprehensive Silver Price Chart Analysis - 26th Jan 15
Stock Market More Retracement Expected - 26th Jan 15
Decoding the Gold COTs: Myth vs Reality - 26th Jan 15
Greece Votes for Syriza Hyperinflation - Threatening Euro-zone Collapse or Perpetual Free Lunch - 26th Jan 15
Draghi's "No-growth" QE Money for Stocks, Zilch for the Economy - 25th Jan 15
Unjust and Undeclared Wars - 25th Jan 15
The European Central Bank Commits Monetary Suicide - 25th Jan 15
Stock Market ECB EQE week - 25th Jan 15
Gold And Silver Timing Is Most Important Element - 25th Jan 15
The Best Way to Invest in the Next Alibaba Internet Stock IPO - 25th Jan 15
The Outpatient Surgery Business Rains Cash into Healthcare Stocks - 25th Jan 15
Stock Traders Flock to Gold GLD ETF - 24th Jan 15
10 Reasons Why You Need an Offshore Bank Account - 24th Jan 15
Goldman Sachs Blankfein - Regulation is Like Background Noise - 24th Jan 15
Gold in Euros Surges As ECB To Print Trillion Euros and Greek Election This Sunday - 24th Jan 15
Gold Bear Market Rally or New Bull ? - 24th Jan 15
Euro-zone 'QE already Working' Says IMF Lagarde - 23rd Jan 15
ECB and EU LTRO and QE for Dummies: Or, Make These Trades - 23rd Jan 15
Debt and Deflation: Three Financial Forecasts - There's More Than Falling Prices - 23rd Jan 15
Market Should Not Doubt' Mario Draghi ECB QE - 23rd Jan 15
Francs, Bonds, Barrels, and Bail-Ins - 23rd Jan 15

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

State of US Markets 2015 Report

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.


© 2005-2014 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

Free Report - Financial Markets 2014