Thursday, September 30, 2010
Jeff Saut Sees the Stock Market's 2010 "Highs" Within Reach
Some pretty bullish musings by Raymond James' Chief Strategist:
Last week most of the major stock market averages I follow broke out of their May – September trading ranges to new recovery highs (small cap indices did not). Confirmatorily, said break-out occurred on a 90% Upside Day (September 20th). According to the invaluable Lowry’s service, “There have been three consecutive confirmed 90% Upside Days since the beginning of September. That’s the first time there have been more than two consecutive 90% Up Days since the March 2009 market bottom.” While I am not looking for a repeat of the 2009 stock market rally, the S&P 500’s (SPX/1148.67) April “highs” seem achievable. Meanwhile, the bears continue to growl, “Where’s the volume?” My reply to that question is that the whole 2009 rally came on declining volume, as did this year’s May mauling, begging the question – does volume really matter? I think it does; yet, I can make the argument that declining volume is actually bullish because it implies most participants just don’t believe the rally is for real. When volume finally arrives, it would suggest the naysayers have finally capitulated, and bought stocks, which I would interpret bearishly as in – who’s left to buy?!
via raymondjames.com
Tuesday, September 28, 2010
I Read the News Today, Oh Boy: "Change"
(HT, Ritholtz)
- Contrarian alert: Central banks halt gold sales - FT
- Dow 2,000,000 - FT
- 12 Shocking Statistics About The Mutual Fund Industry - Business Insider
- The Great Recession may be officially over but Americans don't believe it. - NY Times
- Meredith Whitney: 'States Represent the New Systemic Risk' - WSJ
- ...hence, beware municipal bonds - Felix
- $39 Used Putter Wins $11.35 Million Championship - Business Insider
For links like these in real-time follow me on Twitter.
Friday, September 24, 2010
Monday, September 13, 2010
Stocks Rally to the Neckline
...and the pattern is pretty much complete. It would be reasonable to expect some consolidation here. But IF (caps on purpose) stocks can break out above the current level, the pattern projects about 10% higher into the end of the year - which would be a nice Christmas present for patient bulls.
I Read the News Today, Oh Boy: Cheapest Stock Market In Decades
- Google Redefines Disruption - The “Less Than Free” Business Model - Above the Crowd
- Google Launches 'The Google' For Older Adults - The Onion
- Great news for housing market! Time Magazine just published cover story saying you should never buy a house again - Business Insider
- Concern that stocks will plunge has never been higher in global options markets - Bloomberg
- The Russian Economic Stimulus: Cigarettes and Vodka - Neatorama
- Evidence from 14 U.S. recessions shows that the economy doesn't recover until housing recovers - WSJ
- Housing Doesn’t Need a Crash. It Needs Bold Ideas. - NY Times
- Here's a bold idea from Barry - Ritholtz
Friday, September 03, 2010
Stocks Fit the Pattern
So September starts with a bang and our inverted head and shoulders pattern remains intact. This is almost exactly what I suggested might happen back in July. We'll see if it continues to play out this way. Stay tuned...
Thursday, September 02, 2010
I Read the News Today, Oh Boy: Bank Trust FAIL
- Fleck: "I wouldn't own a financial stock with a gun at my head." - Business Insider
- More than a 10% banks remain at risk of failure even as indicators show some nascent signs of revival - WSJ
- Is Pennsylvania's capital only the beginning of a wave of muni defaults? - WSJ
- The Cult of Equity is dead. Long live bonds. - FT
- Face It, Nobody Is Bullish Anymore... - Business Insider
- ...Except the Insiders - MarketWatch
- Why Labor Day Is the Best Time to Buy a Car - NY Times
Wednesday, September 01, 2010
By One Measure Stocks Are Cheapest In Over a Half Century
There is a vociferous ongoing debate about current stock valuations. Some argue that stocks are "dirt cheap" while others flatly disagree.
To illustrate, below is a chart of the price-to-earnings ratio of the S&P 500 using an average of its trailing five year earnings, my preferred method (data from Robert Shiller):
By this measure, stocks currently trade at a p/e of about 20, just above their 50-year average of roughly 19. Certainly this does not mean stocks are cheap.
However, everything is relative and comparing stocks' earnings yield (earnings divided by price) to that of the 10-year treasury bond we see a very different picture. The chart below plots the ratio of these two measures back to 1960:
As the chart demonstrates, for the first time in over 50 years the S&P 500 sports an earnings yield more than twice that of the 10-year treasury bond. Thus investors can safely say that stocks, relative to bonds, are indeed very cheap.
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