Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
VR and Gaming Becomes the Metaverse - 7th Dec 21
How to Read Your Smart Meter - Economy 7, Day and Night Rate Readings SMETS2 EDF - 7th Dec 21
For Profit or for Loss: 4 Tips for Selling ASX Shares - 7th Dec 21
INTEL Bargain Teck Stocks Trading at 15.5% Discount Sale - 7th Dec 21
US Bonds Yield Curve is not currently an inflationist’s friend - 7th Dec 21
Omicron COVID Variant-Possible Strong Stock Market INDU & TRAN Rally - 7th Dec 21
The New Tech That Could Take Tesla To $2 Trillion - 7th Dec 21
S&P 500 – Is a 5% Correction Enough? - 6th Dec 21
Global Stock Markets It’s Do-Or-Die Time - 6th Dec 21
Hawks Triumph, Doves Lose, Gold Bulls Cry! - 6th Dec 21
How Stock Investors Can Cash in on President Biden’s new Climate Plan - 6th Dec 21
The Lithium Tech That Could Send The EV Boom Into Overdrive - 6th Dec 21
How Stagflation Effects Stocks - 5th Dec 21
Bitcoin FLASH CRASH! Cryptos Blood Bath as Exchanges Run Stops, An Early Christmas Present for Some? - 5th Dec 21
TESCO Pre Omicron Panic Christmas Decorations Festive Shop 2021 - 5th Dec 21
Dow Stock Market Trend Forecast Into Mid 2022 - 4th Dec 21
INVESTING LESSON - Give your Portfolio Some Breathing Space - 4th Dec 21
Don’t Get Yourself Into a Bull Trap With Gold - 4th Dec 21
4 Tips To Help You Take Better Care Of Your Personal Finances- 4th Dec 21
What Is A Golden Cross Pattern In Trading? - 4th Dec 21
Bitcoin Price TRIGGER for Accumulating Into Alt Coins for 2022 Price Explosion - Part 2 - 3rd Dec 21
Stock Market Major Turning Point Taking Place - 3rd Dec 21
The Masters of the Universe and Gold - 3rd Dec 21
This simple Stock Market mindset shift could help you make millions - 3rd Dec 21
Will the Glasgow Summit (COP26) Affect Energy Prices? - 3rd Dec 21
Peloton 35% CRASH a Lesson of What Happens When One Over Pays for a Loss Making Growth Stock - 1st Dec 21
Stock Market Sentiment Speaks: I Fear For Retirees For The Next 20 Years - 1st Dec 21 t
Will the Anointed Finanical Experts Get It Wrong Again? - 1st Dec 21
Main Differences Between the UK and Canadian Gaming Markets - 1st Dec 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Reasons Why The Cyclical Stocks Bull Market Will Continue

Stock-Markets / Stocks Bull Market May 12, 2011 - 04:59 AM GMT

By: John_Hampson


Diamond Rated - Best Financial Markets Analysis Article1. Cyclical stocks bulls historically end when 10 year treasury yields exceed 6% - currently 3.2%:

Source: Stockcharts

2. Cyclical stocks bulls historically end when the yield curve has become abnormal and predicts a recession - the yield curve is currently normal and predicting lower but positive growth ahead:

Source: Fed Reserve Bank Of Cleveland

3. Cyclical stocks bulls historically end with a negative divergence in breadth - currently breadth is supportive and not diverging:

Source: Bespoke Investment

4. Cyclical stocks bulls historically end when official inflation exceeds 4% and we reach overtightening of interest rates - inflation is accelerating and is a warning flag (particularly in light of the official / unofficial statistics discrepancy) but currently receding oil and commodity prices are helping to release the pressure. Interest rates in the main global economies remain low and stimulating - some way from overtightening.


5. Money supply growth and money velocity support a cyclical stocks bull continuation - both are positive and the chart below shows the real and nominal money supply for the G7 countries are both healthy:

Source: Thomson Datastream /

6. OECD leading indicators point to global growth - note the overall picture is bright but there are differences between nations: USA, China and Germany leading indicators are particularly strong, whilst India and Brazil have turned negative.

Source: OECD

7. ECRI leading indicators for the USA continue to point to strength ahead - note there has been a flattening in the last couple of weeks but they still show a strong reading:

Source: / ECRI

8. Earnings continue to beat estimates (note that although the current earnings season has a lower beat rate than preceding quarters, still more companies are beating than disappointing) and equities remain relatively cheap to other assets and relative to history - trading at 13.5 times earnings projections for this year compared to 15 historically:

Source: Bespoke Investment

9. Bloomberg Financial Conditions Index is positive:

Source: Bloomberg

10. The stock market is a leading indicator and remains in an uptrend. Dow Theory also remains supportive:

Source: Portfolio Tilt

11. Seasonality is supportive - the US Presidential cycle pre-election year (which is 2011) has historically been a sweetspot for equities, particularly into early September:


Source: Traders Narrative

Quantitative Easing 2 is ending the last day of June, and some assume this prospect will pull the rug from under equities. But until then we have a full programme of stimulus - the latest POMO schedule has been released covering May 12 to June 10 and represents £93 billion in market purchases, similar to recent schedules. Furthermore, thereafter the Fed will reinvest maturing securities until further notice, making a continued partial stimulus. And only after that will the Fed then consider a rate rise. In short, Fed policy remains supportive of higher asset prices, despite full QE ending in June.

Comparing the current bull with historical bulls, this cyclical bull is likely to last from 2009 through to 2013, and based on average gains this second quartile would see us at around 1280 by June, implying a little pullback here would be normal. Based on averages and the internals of this bull so far, the cyclical bull would then advance a further 50% before finally rolling over in 2013. This fits well with time needed to work through a cycle of interest rate rises to overtightening, treasury yields to double and other typical cyclical bull ending criteria to be met.

Were such events to unfold much quicker, or positive economic feedback looping to sharply reverse, then the above measures and indicators would flash warning signs in advance. Until then, the amalgamated forecast is clear: the stocks cyclical bull will continue.

John Hampson

John Hampson, UK / Self-taught full-time trading at the global macro level / Future Studies / Forecasting By Amalgamation.

© 2011 Copyright John Hampson - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

© 2005-2019 - 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