Best of the Week
Most Popular
1.BrExit House Prices Crash, Flat or Rally? UK Housing Market Affordability Crisis - Nadeem_Walayat
2.Stocks Bull Market Climbs Wall of Worry, Bubble? When Will it End? - Nadeem_Walayat
3.Gold Price Is Now On Its Way To All-Time Highs - Hubert_Moolman
4.Deutche Bank Stock Price Crash - The EU Has Problems Far Beyond the Brexit - Harry_Dent
5.UK interest Rate PANIC CUT! As Banks Prepare to Steal Customer Deposits - Nadeem_Walayat
6.Gold and Silver Bull Phase 1 : Final Impulse Dead Ahead - Plunger
7.Central Bankers Fighting An Unprecedented Global Economic Slowdown - Gordon_T_Long
8.Putin Hacking Hillary for Trump, Russia's Manchurian Candidate? - Nadeem_Walayat
9.Stock Market Insiders Are Secretly Selling, Cycle Top Next Month - Chris_Vermeulen
10.Gold Sector - Is it time to Back up the Truck? – Mortgage the Farm? - Peter_Degraaf
Free Silver
Last 7 days
It’s Official: The Global Real Estate Bubble is Finally Bursting! - 30th Aug 16
7 Things to Remember When Inflation Returns - 30th Aug 16
The Pro Hillary Supporter Challenge - 30th Aug 16
Semiconductor Stocks Sector, Updated - 30th Aug 16
Stagflation to Force People into Gold - 30th Aug 16
Late-August Calm a Breeding Ground for Gold Bullion Bank Shenanigans - 30th Aug 16
Stock Market Long View - 30th Aug 16
Fundamentals for Uranium look great; is the Uranium Market ready to soar? - 29th Aug 16
3 Ways to Profit from the Stressed-Out American Consumer - 29th Aug 16
Have The Markets Become Too Big to Fail? - 29th Aug 16
Pakistan Booming House Prices Housing Market Mania Kabza Mafia Warning! - 29th Aug 16
Post Yellen = Market Confusion - 28th Aug 16
Theresa May Instructs Police, NHS Gp's, Public Sector To Stop Racial Discrimination in Service Delivery - 28th Aug 16
Ignore Yellen and Buy the Dip in Precious Metals - 27th Aug 16
SPX Downtrend Should be Underway - 27th Aug 16
Unraveling the Secular Economic Stagnation Story - 27th Aug 16
The Precious Metals Sector and the Fed. . . - 27th Aug 16
Stock Market - All Is Calm, All Is Not Right - 27th Aug 16
Gold Junior Stocks Q2 2016 Fundamentals - 26th Aug 16
Buy Gold’s August Dip? Gold’s Monthly Sweet Spot In September - 26th Aug 16
The IMF’s Internal Audit Reveals Its Incompetence and Massive Rule Breaking - 26th Aug 16
Commodities Are the Best Bargain Now—Here’s What to Buy - 26th Aug 16
Why I Left Canada and Became A Citizen of the Dominican Republic - 26th Aug 16
The GLD vs GOLD - 26th Aug 16
Can Stocks Survive Without Stimulus? - 25th Aug 16
Why Putin Might Be on His Way Out - 25th Aug 16
Bond Guru Gary Shilling - The Bond Market Rally of a Lifetime - 25th Aug 16
A Zombie Financial System, Black Swans and a Gold Share Correction - 25th Aug 16
OPEC’s Output Freeze: What Has Changed Since Doha? - 25th Aug 16
Merkel Prepares For a Deliberate Crisis While White House Plans For a Disastrous Succession - 24th Aug 16
Suspicious Reversal in Gold Price - 23rd Aug 16
If Trump Can’t Pull Off a Victory, Expect a Civil War - 23rd Aug 16
Ceding ICANN and Internet Control to Globalists - 23rd Aug 16
How to Spot an Oversold Stock Market - 23rd Aug 16
Gerald Celente Sees Worst Market Crash, New Military Conflict, Gold Spike to $2,000/oz - 23rd Aug 16
EU Olympics Medals Table Propaganda Includes BrExit Britain - 22nd Aug 16
BrExit Win's Britain Olympics Success Freedom Dividend, Economy Next - 22nd Aug 16
Stock Market Top Forming, but Slowly - 22nd Aug 16
(Really) Alternative Banking Systems - 22nd Aug 16

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

US Economy - 3 Secret Charts

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.


© 2005-2016 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

Catching a Falling Financial Knife