Posts filed under “Technical Analysis”
Robert J. Shiller, a co-winner of this year’s Nobel Prize in Economic Sciences says US stocks are expensive. They are the most expensive relative to earnings they have been in more than five years — since the lows follwoing the great collapse of 2007-09.
Shiller’s CAPE ratio — the cyclically adjusted price-earnings ratio — compares the Standard & Poor’s 500 Index with companies’ average profits over the prior decade. The ratio ended last month at 23.7, the highest since January 2008, according to data available from his website.
Bloomberg notes that “the September ratio was lower than a peak of 27.5 in May 2007 — and even further below a record of 44.2, set in December 1999.” Date for Shiller’s price-earnings figures go all the way back to 1881 (above chart 1900 – present).
Shiller made several other comments on equities:
“The stock market is rather highly priced. I worry that it might correct down.”
“I don’t think one should view it with alarm.”
“One could well — and probably should, in a diversified portfolio — invest in stocks.”
A far cry from his prior warnings of dot com stocks in 1999 and housing in 2006.
The CAPE ratio was developed by Shiller and Harvard University professor, John Y. Campbell.
Chart of the Day: Shiller Views U.S. Stocks as ‘Highly Priced’:
A 90% up day is bullish & the stats support a year-end rally click for giant table Source Merrill Lynch BA On Thursday. we had a huge up day, with US markets gaining ~2%. Some folks credited the possibility of a debt ceiling deal, while others called it a low volume short covering…Read More
click for ginormous chart Source: Investech We are almost through September and despite its reputation for volatility, the month has seen strong upside and new bull market highs. The S&P500 lost “only” 4.6% in August, but based on the Sturm und Drang you are forgiven for assuming it was 3X that amount. As…Read More
You know I love these sorts of things: Dr. Ed Yardeni has a nice set of monster sentiment charts posted at his site. The link is Stock Market Indicators: Fundamental, Sentiment,. & Technical and its 20 pages of fun. courtesy of Yardeni Research, Inc. September 17, 2013.
Reading through the classic textbook, Technical Analysis of Stock Trends, last night I stumbled upon a stunning stat comparing the returns of a strategy using Dow Theory versus buy and hold. Using Dow Theory buy and sell signals would have turned an initial investment of $100 in 1897 into $492,597.38 by the end of 2010. …Read More
Shiller P/E Bottoms Coincide with Major Lows, Downtrend Breaks Precede Rallies Click for ginormous chart Source: Merrill Lynch Nice chart from Stephen Suttmeier & Co looking at how the Shiller P/E ratio compares to regular P/E at major lows, downtrend breaks, and before rallies: The good news is that secular trading ranges lead to…Read More
Click to enlarge Source: Merrill Lynch/BoA This is an interesting chart: Improving Wall Street sentiment is still no where near the levels associated with excessive sentiment. Despite the ongoing rally — or perhaps because of it — we are now all the back to the levels enjoyed at the lows in March 2009. Merrill notes…Read More
Click to enlarge Source: The Chart Store via All Star Charts We have not looked at the Presidential Cycle in some time (See this, this and this from 2005). Regardless, it is something that people often fail to contextualize correctly: What the chart above shows is the historical average of the 4 year presidential…Read More
click for larger table Source: Merrill Lynch Global Research, Interesting look at bull markets that have gone on without a 20% correction (note this is within the context of a 20%+ cyclical rally). Merrill Lynch’s Global Research team note that 2 prior cyclical bull markets marked a transition from a secular bear market…Read More