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
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
Are Plunging Petrodollar Revenues Behind the Fed’s Projected Rate Hikes? - 22nd Jan 15
Stocks Bear Market Lessons from History - 22nd Jan 15
Russia's Plans for Arctic Supremacy - 22nd Jan 15
166 Trillion Reasons Why Bank Stocks Are So Cheap - 22nd Jan 15
Will Gold Price Break Out Once Again? - 22nd Jan 15
The Cult of Central Banking - 21st Jan 15
Five Stock Market Questions Wall Street Hopes You’ll Never Ask - 21st Jan 15
China's Yuan Enters the Currency "Big Leagues" to Take on the Dollar - 21st Jan 15
Investor implications of QE by the ECB - 21st Jan 15
Deflation Bonanza! And the Fool's Mission to Stop It - 21st Jan 15
Messin' With My Financial Brain - 21st Jan 15
Are Stock Market Buyouts Checking Out? - 20th Jan 15
Legal “Steroids” Are Making This Tech Stock a “Buy” - 20th Jan 15
Are Stock Market Storm Clouds Massing? - 20th Jan 15
The Swiss Release the Kraken! - 20th Jan 15
The European Union, Nationalism and the Crisis of Europe - 20th Jan 15
Swiss Say No to QE - 20th Jan 15
Gold Demand Explodes as Volatility and Fear Stalk Market - 20th Jan 15
The Truth About This Stock Market "Meltdown" Indicator - 20th Jan 15
Markets 2015 More Of The Same? - 20th Jan 15
Is Market Sentiment Shifting to Gold? - 20th Jan 15
U.S. Dollar’s Major Breakout and Gold’s Simultaneous Rally - 19th Jan 15
Silver Price Breaks Out on Swiss France Euro Decoupling - 19th Jan 15
Gold Bullish Inverse Head and Shoulders Pattern - 19th Jan 15
Bundesbank Announces Repatriation of 120 Tonnes of Gold from Paris and New York Federal Reserve - 19th Jan 15

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

State of US Markets 2015 Report

Stock Market Warning Sign, Global Liquidity is Drying Up!

Stock-Markets / Stock Markets 2010 Apr 28, 2010 - 08:34 AM GMT

By: Claus_Vogt

Stock-Markets

Best Financial Markets Analysis ArticleIn last week’s Money and Markets column I told you the majority of my indicators are signaling that the stock market has probably entered the last phase of its medium-term uptrend, which began in March 2009.

I went over price-to-earnings ratios (based on twelve-months trailing GAAP earnings) and dividend yields. Both metrics are showing a heavily overvalued market.


Today I want to add that “normalized earnings,” which try to even out the impact of the ups and downs in the business cycle, are strongly supporting this message.

Plus, I’d like to give you updates on what I discussed last week and tell you about one more important signal …

Sentiment Indicators Still Euphoric

I reported that mutual fund cash level was an excessively low 3.5 percent in February. Now the March figure is in, and it’s the same as February’s! The only other time we’ve seen fund managers holding such a low level of cash was in the summer of 2007, a short three months before a major stock market high.

The percentage of bullish advisors is dangerously high, and it’s still rising!
The percentage of bullish advisors is dangerously high, and it’s still rising!

Next, I want to give you the latest readings of Investors Intelligence Advisory Sentiment …

The bullish contingent stands at 53.3 percent, up from 51.1 percent just a week ago. Whereas bearish advisors are down to a very low 17.4 percent, well below the 20 percent threshold typically indicating at least short-term danger for the stock market.

Even more bothersome is the most recent ratio of bullish to bearish financial newsletters, currently at 3.06, as shown in the second panel of the chart below. Last week it was 2.7.

This tells us that the short-to medium-term upside potential is very limited.

S & P Chart

Source: www.decisionpoint.com

Then I discussed how equity put-call ratios had fallen to levels not seen since 2000, the year of the famous NASDAQ top, when the dot com bubble burst.

Well, as you can see in the second panel of the following chart this ratio is still hovering around that extremely low level. The 10-day average is currently at 0.46, up a meager 0.01 from last week.

And the 10-day average of the total CBOE put-call ratio, the third panel of the chart, is still a very low 0.77. Last week’s small market correction did nothing to dampen option speculators’ willingness to bet on further rising stock prices.

S & P Chart

Source: www.decisionpoint.com

What’s more …

Liquidity Has Dried Up Globally

There still seems to be a lot of talking about the huge liquidity driving this market higher. And yes, the Fed’s answer to the housing and banking crisis was a historical wave of liquidity with M-2 money supply growth rates of more than 10 percent. But take a look at the chart below to see what has happened since.

Year over year M-2 growth has stalled … growing by a mere 2 percent. That’s a far cry from a huge wave of liquidity. It’s better described as a trickle.

S & P Chart

And if you take a global view, the picture is even getting worse!

The so called excess liquidity of the G7 nations, measured as M-1 minus industrial production minus consumer price inflation, has actually declined by 5 percent during the first quarter of the year.

If this global stock market rally was driven by liquidity — and I really think it was — the drying up of global liquidity should be seen as a clear warning sign.

The bull move, which in my opinion was a huge bear market rally that started in March 2009, is already on borrowed time. And I expect the market to top out during the coming months.

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.


Post Comment

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

Free Report - Financial Markets 2014