Best of the Week
Most Popular
1.The Trump Reset, US Empire's Coming Economic, Cyber and Military War With China (2/2) - Nadeem_Walayat
2.Now Is the Time to Buy Gold - 5th Jan 17 - John Grandits
3.CIA Planning Rogue President Donald Trump Assassination? Elites "Manchurian Candidate" Plan B - Nadeem_Walayat
4.The Trump Reset - Regime Change, Russia the Over Hyped Fake News SuperPower (Part1) - Nadeem_Walayat
5.Most Popular Financial Markets Analysis of 2016 - Stock Market Crash Postponed Again - Nadeem_Walayat
6.No UK House Prices Brexit Crash 2016 Despite London Weakness, Forecast 2017 - Nadeem_Walayat
7.President Trump Understands the NSA, CIA... LIE, America's Intelligence Agencies Crime Syndicate! -Nadeem_Walayat
8.President Donald Trump's 2017 New Year Message, BBC Fake News, Was 2016 a Dream? - Nadeem_Walayat
9.Major Stocks Bear Market Still Looms - Zeal_LLC
10.Biased 2017 Forecasts - Debt, Housing and Stock Market (1/2) - James_Quinn
Last 7 days
United States Common Sense - 2017 - 23rd Jan 17
Is Dow 20,000 a Bridge Too Far? - 23rd Jan 17
The New Gold Rush Of 2017! - 23rd Jan 17
HBO HOMELAND Bet on HIllary Clinton Winning US Election and LOST - 23rd Jan 17
Stock Market New Highs For 2017? Yes, But When Do I Enter? - 22nd Jan 17
Active vs Passive Investing: And the Winner Is ... - 22nd Jan 17
The Epidemic of Bad Ideas - 22nd Jan 17
Gold Futures Prices Looking Bullish - 22nd Jan 17
Time for Crude Oil Price Drop below $50? - 21st Jan 17
AI and Robotics - We Are All Low-Skilled Workers Now - 21st Jan 17
The Trump RESET Starts on US Presidential Inauguration Day 2017 - What to Expect - 20th Jan 17
Will the CIA Assassinate Rogue President Donald Trump Like JFK? - 19th Jan 17
Bonds, Dollar, Stocks, Gold, Silver Major Markets at Turning Points - 19th Jan 17
Populism; the Danger? What About Debt? - 19th Jan 17
Gold Price 50-DMA Breakout - 19th Jan 17
Turkey, 'Axis of Gold' and End of US Dollar Hegemony - 19th Jan 17
The Most Important Market Chart on the Planet - 19th Jan 17
Trump Deficits Will Be Huge - 19th Jan 17
Stock Market Trading Patience Pays Off with CHK Using Momentum Reversals - 19th Jan 17
Gold - How to "Buy Low and Sell High" Like a Pro - 19th Jan 17
State of the Global Stock, Financial and Commodity Markets Report 2017 - 19th Jan 17
The Hunt for Russia's Next Enemy - 18th Jan 17
Returning Gold Bulls - 18th Jan 17
Biotech Breakthrough Could Create A $11.4 Trillion Opportunity - 18th Jan 17
Bitcoin and Gold - Outlook, Volatility and Safe Haven Diversification - 17th Jan 17
Stock Market Uptrend on Borrowed Time - 17th Jan 17
The One Stock to Retire On - 17th Jan 17
Trump anti-Communist Counter Revolution - 17th Jan 17
US Stock Market Update as the Trump Inauguration Approaches - 17th Jan 17
The American Crisis - Common Sense 2017 - 17th Jan 17
Obama Leaves, Hope Arrives, Will Stupid Stay? - 17th Jan 17
Damage Inflicted by Precious Metals Manipulation Is in the “Multi Billions” - Keith Neumeyer - 17th Jan 17
Gold Price Forecast 2017 Update - Video - 17th Jan 17
The Story of the U.S. Regime Change Plan in the Philippines - 16th Jan 17
Gold Price 2017 Trending Towards $1375 as Forecast - 16th Jan 17
'Deep State' CIA Director States We are Not NAZI's, Warns Trump Does Not Understand Russian Threat - 15th Jan 17
UK House Prices Forecast 2017 - Crash or Bull Market? - Video - 15th Jan 17

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

State of Global Markets 2017 - 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.


© 2005-2016 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