On three or four occasions over the past fifteen years or so I've posted a similar warning to all MFO readers. I keep track of all of our investments on a spreadsheet, and very infrequently it becomes necessary to adjust the range of some of the charts.
Increasing the range on the downside has never resulted in the market going up. However, increasing any of the parameters to the upside has always been followed shortly thereafter by a significant market "correction", sometimes referred to as a "crash".
Be advised that I have just made such an adjustment. GOOD LUCK TO ALL OF US!
Further note: The caps above were unintentional- the investment gods must have made me accidentally hit the "caps" key. Surely a sign from above!
Comments
When were the last four times?
I am seeing an unprecedented low reading on my market barometer if I remove the floor on all the feeds with the exception being earnings. The earnings feed is keeping the barometer reading propped up. The barometer reading with the floors in place is 130 and when the floor is remove letting the readings float then the barometer reading drops to 112. This is the impact the improvement in reported year-over-year earnings and forward estimates are having on stock market prices. It seems investors are currently willing to pay dearly now for earnings thus extending the markets to richly priced levels by some metrics. In addition, the carry trade is drawing foreign money to the States plus perhaps some retail investors are now selling bonds and buying stocks.
Currently, I am overweight equities by 10% over what my market barometer and equity weighting matrix are calling for. In most past years I have trimmed based upon my matrix.
Is it time to cut and run? Perhaps. But, at this time, I going to stay with the trend until I see the money flow and the relative strength indicators, which make up my technical score feed, start to give way.
I wish all ... "Good Investing."
Should it continue to drop and reach a reading of 135 then the Index (stocks) will have moved from overvalued to overbought by the barometer.
All of the barometer's feeds with the exception of the earnings feed have the Index overbought and if it were not for the forward earnings outlook and an improvement in TTM earnings the barometer would reflect the Index to be extremely overbought.
Today @Old_Skeet said
The earnings feed is keeping the barometer reading propped up. The barometer reading with the floors in place is 130 and when the floor is removed letting the readings float then the barometer reading drops to 112. ***
***That may put it in irrational exuberance territory!
It had become a catchphrase of the boom to such an extent that, during the economic recession that followed the stock market collapse of 2000, bumper stickers reading "I want to be irrationally exuberant again" were sighted in Silicon Valley and elsewhere.
https://en.wikipedia.org/wiki/Irrational_exuberance
P.S. O_S, please consider posting your "The Markets and More ..." in a separate post.It sometimes gets lost in someone's exuberance to post... and post...and post...etc..etc.
Thanks for following my post "The Markets & More." I started this post to keep the board engerized while @Ted was away due to health reasons. Ted has been a long standing contributing member of both Fund Alarm and MFO; and, in his retirement this has provided him with an activity that keeps him occupied and one that he has done well with plus he has provided a service to many. Since, I am a student of Ted's, so to speak, from my learning through his many post I have decided to post the content of what was the Market & More under his morning opening thread. You may recall I also wrote of this in prior post that the Markets & More would be no more when Ted returned and I'd continue to host the thread of "What Are You ... Buying ... Selling .... or Pondering?"
Once, I start the throttle down process in my equity allocation I'll let everyone know. Come fall, I'll most likely start the throttle up process and start posting barometer readings again at this time. Know this, not only by my findings and thoughts but by the findings and thoughts of many others there is a common belief that the markets are currently extended.
I'm going into March with a full boat load of equities (within my asset range of course). And, I plan to start a throttle down (rebalance) process when I see a break down in technicals and/or we make it through March. Come May, I am thinking I should be by then in alignment with my barometer and equity weighting matrix.
For those wanting to read the latest barometer report check Ted's Morning Breakfast Briefing.
Thanks again for your interest.
Old_Skeet