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

Stocks Bear Market Rally Looking Toppy

Stock-Markets / Stocks Bear Market Apr 21, 2010 - 08:22 AM GMT

By: Claus_Vogt

Stock-Markets

Best Financial Markets Analysis ArticleFrom a big-picture perspective, the stock market’s advance off the March 2009 low is nothing more than a huge, bear market rally.

To understand how I come to that conclusion, just look at two classical valuation measures, price-to-earnings ratios and dividend yields, in the chart below. You can easily see how this stock market bear, which started in 2000 at record overvaluations, still has a lot of work to do …


S&P 500, Price Earnings Ratio, and Dividend Yield, 1926 to 2010

S & P Chart

With a price-to-earnings ratio of 23.39 on a twelve-months trailing GAAP earnings basis, valuations are as high as they usually get during an upward cycle.

And the dividend yield is under two percent. That’s way below the three percent threshold, historically indicating an extremely overvalued market.

Meanwhile, Bullish Exuberance Is Back to Dangerous Levels

Do you remember the depressive sentiment during the depth of the crisis in late 2008 and early 2009? It looked like the world was coming to a standstill. Everybody seemed to hate the stock market. Even mainstream economists who tend to be bullish and upbeat all the time showed signs of doubt.

About a year and a half later that picture has changed dramatically!

Bullish forecasts for the economy and the stock market are back in vogue. In fact, Investors Intelligence is telling us that 51.1 percent of stock market advisors are bullish again, back up from less than 25 percent during the fourth quarter of 2008.

Large Cap Index Chart

As shown in the bottom panel of the above chart, the number of financial newsletters leaning bullish is on the rise, too … well above the 2.0 level considered a bullish extreme.

Even more important, though, is the bullishness of mutual fund managers …

The average mutual fund cash level has fallen to a mere 3.5 percent as indicated in the following chart. In hitting that level, this important sentiment indicator has tied the record reached during the summer of 2007.

Mutual Fund Cash Chart

Equity put-call ratios are also falling dramatically, reaching euphoric levels not seen since 2000.

Call Ratio Chart

Conclusion: The Air Is Getting Thin for the Stock Market

The stock market has rallied roughly 80 percent since the March 2009 low bringing valuation metrics back to nose-bleed levels. Money supply growth has tumbled to a trickle, while stock market sentiment is back to euphoric highs.

And we still have to deal with a housing market that’s in shambles, an economy lacking growth momentum, and 9.7 percent unemployment!

All these observations add up to one compelling conclusion: The stock market has entered the last phase of the huge bear market rally off the March 2009 low. And the next few months will probably show the topping phase, the prelude of the next bear market leg.

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.


© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

Jethro114
21 Apr 10, 12:43
Perma Bear

Says Claus_Vogt the perma bear.

The markets going to have to drop a lot for you just to break even!


Post Comment

Only logged in users are allowed to post comments. Register/ Log in