With stocks hitting new all-time highs once again last week, this major warning indicator just hit the highest level since 1987.
Highest Level Since Early 1987
By Peter Boockvar, author of the Boock Report
October 25 (King World News) – Here is what Peter Boockvar had to say ahead of the next round of monetary madness: The US 10 yr yield is rising again to 2.44-.45% and that is exactly where it stood on the last trading day of 2016 and is smack in the middle of what was a 2.30-2.60% trading range for many months this year. The 2 yr sits at 1.60% and the 5 yr at 2.06%. For reference, the dividend yield on the S&P 500 is down to 1.94%. The CRB index by the way closed at a fresh 5 month high yesterday…
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Now that we are in the midst of earnings season, I’m sure you hear every day and possibly think it yourself that this is an earnings driven market. I need to remind everyone that over the last 5 years it has been predominantly a P/E multiple driven market. Over the last 5 years earnings per share (goosed by huge stock buybacks and lowered interest expense) has risen by 30% vs the 80% rise in the S&P 500. If it was truly an earnings driven market, the S&P 500 would be at 1850 which is a 30% gain from the December 2012 close. I point this out to circle back to where interest rates are trending, the importance of what the ECB will announce tomorrow on QE and the continued tightening the Fed is conducting.
With price driving sentiment, Investors Intelligence said Bulls rose 2.3 pts to 62.3, the most since March 1st. Bears fell .1 pt to 15.1, the lowest since May 2015. The spread between the two at 47.2 is now at the highest level since early 1987. Stated before, when Bulls have gotten to 60+ this year, the market has stalled out and consolidated its gains for a few months. It then recouped and rallied when Bulls got down around 50. Over the past two weeks since Bulls got back to 60, the S&P 500 is up .5% while the NASDAQ, Russell 2000 and Transportation index are down. With the DJIA being a price weighted index and with half the stocks at a triple digit price, it’s obviously bullied by a few stocks. Two stocks in the DJIA yesterday added 135 points.
Plus these important notes from legend Art Cashin:
Art Cashin: Jason Goepfert, over at SentimenTrader took note of how unusually narrow the Dow action was. Here’s a bit of what he said:
Let’s take Tuesday’s session as an example. The Dow rose well more than 0.5% and scored a 52-week (and all-time) high, yet there were only 17 stocks that advanced, versus 13 that declined. The last time the Dow (index) had such a great day with so few advancing stocks was January 14, 2000, when there was only 1 more advancing than declining stock. That day, it happened to be powered by Intel, which accounted for 29% of the Dow’s gain. On Tuesday, it was 3M, which accounted for 54%.
Over the past 20 years, when the Dow climbed more than 0.5% to a 52-week high, an average of 19 more stocks advanced than declined. That makes Tuesday’s reading of 4 highly unusual.
The narrowness of the Dow spike and the lack of confirmation in the action of the Nasdaq and S&P was a big topic in after-market watering holes.
The afternoon brought mostly a sideways drift but, when an attempt at a 2:20 rally failed to make a new high, there was a slight rollover into the bell.
The narrowness of the rally was further evident in the breadth with advances edging declines by a narrow 15 to 13. But, the Dow did set a record and that goes in the books.
Tough As A $5 Steak – Some of the great names in investing are expressing some form of frustration with some of the actions of the current market. People like Seth Klarman and David Einhorn have spoken recently.
My good friend and fellow trading veteran, Jeff Saut, has also expressed a bit of frustration. Over the decades, Jeff and his market models have, time and time again, made timely and very accurate market calls.
Jeff notes the fact that even the most successful investor can see the market zig when he thought it should zag. As an example, Jeff pulled up a quote from Warren Buffet who once said:
Essentially, I am out of step with present conditions. On one point, however, I am clear. I will not abandon a previous approach whose logic I understand (although I find it difficult to apply) even though it may mean foregoing large and apparently easy profits to embrace an approach which I don’t fully understand, I have not practiced successfully and which, possibly, could lead to substantial permanent loss of capital.
All markets have personalities. This one’s just a bit different, for now at least.
Overnight And Overseas – In Asia, Tokyo saw a mild pullback while stocks in Hong Kong and Shanghai had moderate rallies. India saw a rather celebratory rally.
In Europe, London was down a few ticks on some further Brexit chatter. Markets on the continent are seeing modest gains.
Among other assets, gold is down a bit but holds above the key $1260 zone. Oil is a bit softer on mixed inventory data. The euro is a bit firmer against the dollar on rumors of possible ECB tapering Treasury yields.
Consensus – Earnings likely to stay in driver’s seat through Thursday’s tech cluster. Watch oil inventories at 10:30.
Stick with the drill – stay wary, alert and very, very nimble.
***ALSO JUST RELEASED: China Is Getting Ready To Unleash Its Plan For A Gold-Centric Monetary System CLICK HERE.
***KWN has now released the remarkable audio interview with Dr. Stephen Leeb discussing the catalyst for a mega-bull market in silver, the takedown in the metals, oil and much more CLICK HERE OR ON THE IMAGE BELOW.
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