Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Fantasy Stock Market: “NIFTY NINE” FINALLY BECAME JUST “FANTAsy”!

Stock-Markets / Stock Markets 2016 Jan 21, 2016 - 02:03 PM GMT

By: Gordon_T_Long

Stock-Markets

In the November Issue of Triggers we discussed “FANG & NOSH”. In December we further discussed the mutation of this group to the “NIFTY9”. This month as markets fall we need to discuss how the “NIFTY9” finally became just “FANTAsy” and the potential $1T seriousness of what this means.


The rise of index ETFs and mutual funds which all depend on these FANTAsy stocks, has never accounted for this much of the market before.  The rapid emergence of Index ETFs accounted for nearly 30 percent of the trading in the U.S. equities market last summer.  FANTAsy weakness will magnify, or even potentially cause flash crashes if they break critical support levels. This is an untested $1 trillion stock bubble problem! Let’s examine the problems and where FANTAsy may be headed.

 

FANG & NOSH

As we entered Q4 earnings season and the economic news continued to deteriorate, it was clearly evident that we had eight stocks called “FANG & NOSH” holding up the US equity markets. Market breadth had collapsed but not the indexes – yet!

 

“FANG” STOCKS

  • Facebook,
  • Amazon,
  • Netflix and
  • Google

 

 

THESE EIGHT BECAME THE “NIFTY NINE”

While the S&P languishes unchanged in 2015, these small groups of overwhelmingly propagandized stocks were up on average over 60%, but with a collective P/E of 45, they were not cheap.

Ned Davis Research identified the NIFTY NINE in December, which added the following to the four FANGs:

 

  • Priceline,
  • Ebay,
  • Starbucks,
  • Microsoft and
  • Salesforce. (Note that Apple appears on neither list which until recently was THE MARKET and accounted for 20% of the underlying Margin Expansion since 2010.)

WE HAD FALSE EUPHORIA CENTERED ON 9 STOCKS

This was very similar to what we have witnessed at all bubble tops.

Only the names change (the 4 Horsemen in the Dotcom Bubble run-up: Cisco, Intel, Microsoft & Qualcomm) and the rationalization hype (2000: “new economic paradigm”)


“NIFTY9” HID THE FACT THAT INSTITUTIONS HAD LEFT THE PARTY

Institutions were seeing the following

  • Sales Growth was no longer there,
  • Earnings were steadily falling,
  • Companies were spending more on Buybacks and Dividends than they were actaully earning:
  • Almost 60 percent of the 3,297 publicly traded non-financial U.S. have bought back their shares since 2010.
  • In fiscal 2014, spending on buybacks and dividends surpassed the companies’ combined net income for the first time outside of a recessionary period, and continued to climb for the 613 companies that have already reported for fiscal 2015.
  • In the most recent reporting year, share purchases reached a record $520 billion. Throw in the most recent year’s $365 billion in dividends, and the total amount returned to shareholders reaches $885 billion, more than the companies’ combined net income of $847 billion.
  • Spending on buybacks and dividends has surged relative to investment in the business. Among the 1,900 companies that have repurchased their shares since 2010, buybacks and dividends amounted to 113 percent of their capital spending, compared with 60 percent in 2000 and 38 percent in 1990.
  • Among approximately 1,000 firms that buy back shares and report R&D spending, the proportion of net income spent on innovation has averaged less than 50 percent since 2009, increasing to 56 percent only in the most recent year as net income fell. It had been over 60 percent during the 1990s.

FANTAsy – FAN + Tesla + Alphabet

At the end just before the markets began collapsing at year beginning 2016, we had the FANTAsy stocks. This included the core FAN plus Tesla and Alphabet (Google).

By considering an Equal-Weighted Stock Index which removes the FANTAsy distortions from the market many technicians  were able to identify clearly what was occurring.

“FAN” HAS BROKEN DOWN – Possible Near Term Support and Then Another Drop??

 

CONCLUSIONS

 

A technical view of the equal-weighted US stock index may help resolve the support question.

 

It appears to suggest the market has further to fall in Q1 2016!

 

 

Caution is advised, as it has been since we first identified the FANGs in the market,

which could really bite the unsuspecting!

 

Gordon T. Long
Publisher - LONGWave

Signup for notification of the next MACRO INSIGHTS

Request your FREE TWO MONTH TRIAL subscription of the Market Analytics and Technical Analysis (MATA) Report. No Obligations. No Credit Card.

Gordon T Long is not a registered advisor and does not give investment advice. His comments are an expression of opinion only and should not be construed in any manner whatsoever as recommendations to buy or sell a stock, option, future, bond, commodity or any other financial instrument at any time. While he believes his statements to be true, they always depend on the reliability of his own credible sources. Of course, he recommends that you consult with a qualified investment advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction, before making any investment decisions, and barring that you are encouraged to confirm the facts on your own before making important investment commitments. © Copyright 2013 Gordon T Long. The information herein was obtained from sources which Mr. Long believes reliable, but he does not guarantee its accuracy. None of the information, advertisements, website links, or any opinions expressed constitutes a solicitation of the purchase or sale of any securities or commodities. Please note that Mr. Long may already have invested or may from time to time invest in securities that are recommended or otherwise covered on this website. Mr. Long does not intend to disclose the extent of any current holdings or future transactions with respect to any particular security. You should consider this possibility before investing in any security based upon statements and information contained in any report, post, comment or suggestions you receive from him.

Copyright © 2010-2016 Gordon T. Long

Gordon T Long Archive

© 2005-2022 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