The S&P 500 recently broke out of a multiple-year consolidation box, similar to the breakouts in 1995 and 1985 (see three charts below). The possible relevance for 2016-2017 can be seen by reviewing the historical charts in this post (1982-2016).
Typically, when markets break out from long-term consolidation boxes, it tells us something has fundamentally changed. However, the fundamental drivers that kept the market contained in the consolidation box may still need one...
A market’s 200-day moving average can assist in monitoring investors’ net aggregate tolerance for risk. Notice in the first chart below the S&P 500 was unable to recapture its 200-day after dropping below it in October 2000.
Assisted in part by some improvement in China, emerging markets (EEM) recently cleared a resistance zone that had bounded prices for several months. A tick up in the market’s tolerance for risk can be seen in the chart below...
In what is a microcosm of the last two years, the S&P 500 broke below its recent trading range roughly two weeks ago. The bearish breakdown quickly turned into a failed breakdown as stocks reversed and shot back up in a vertical manner.
The UK’s recent vote to leave the EU has shed some additional light on existing weak spots in the European economy. One of those weak spots is Italian banks. From The Wall Street Journal...
During the financial crisis, demand for defensive Treasuries soared as economic and systemic concerns started to pile up. How have bonds performed relative to stocks since the Federal Reserve did an about face on interest rates in early 2016?...
Stocks have staged an impressive rally off the recent Brexit low, which may turn into a push to higher highs. However, as noted on Twitter, the S&P 500’s chart currently contains two lower highs, and a recently printed new multi-month low.
With the European Central Bank (ECB) getting ready to take center stage Thursday, the concept of negative interest rates has many investors scratching their heads. In this article, we will explore the following question: Why are governments considering negative interest rates...
Based on 30-day Fed fund futures prices, the CME Group estimates a 74% probability the Fed will raise rates in December after keeping them steady for years. From a historical perspective, the table below shows the dates when the Federal Reserve began to raise rates following a period of...
You may have run across an article or two stating that NYSE margin debt recently reached an all-time high (ATH). Some of the articles equate a new high in margin debt with a new high in speculation, which must mean...
Markets are always reassessing the balance between bullish information and bearish information. If concerns about anything, including Greece, were significant relative to bullish information, we would expect to see...
While we make decisions based on observable evidence (rather than forecasting), it is always a good idea to understand bullish and bearish possibilities. One bullish scenario that could enable the broad market to break from...
Points A, B, C, and D in the chart below show a series of higher lows. The higher lows tell us that buying conviction has exceeded selling conviction at higher and higher levels in recent months. Another way to visualize the formation of the triangle is that dip buyers...
The market will be looking to see if the Fed drops the phrase “considerable time” from their upcoming December 17 statement. Changing the language would increase the odds of an interest rate hike coming in the next six months, something that could spook the stock and bond markets.
When you get down to brass tacks, asset prices are governed by supply and demand. In the markets, the conviction of buyers relative to the conviction of sellers also plays a major role.
Stock prices have a high correlation to economic activity and earnings. History tells us bear markets are often kicked-off by recessions. Recent economic data does not hint at an imminent recession. However, a mixed message came in a September 15 report on industrial production.
If top policy makers and military leaders were caught off guard by the military action in Iraq, as reported by The Wall Street Journal, then we can assume the same can be said for many investors.
On April 8, we outlined reasons to be concerned about stocks. The Fed pays close attention to the market’s risk profile; maybe they didn’t like what they saw. In addition to the Fed minutes that were released Wednesday, Charles Evans seemed to be carrying the “talk stocks back up” torch for the U.S. central bank.
