Skip to main content

Evaluating the Stock Market: Where's it going?

Of course, the question "Where's it going?" is rhetorical. I cannot answer that, nor can anyone else, if they're honest (though many pundits and talking heads will try to convince you that they know: they do not). 

However, there are some indicators that can try to show trends. A market trend is very important, because a strong trend either up or down can bring most stocks with it. Not all; there will always be stocks that do not follow along.

When deciding whether I'm in or out -- and these are for long-term investing (weeks and months) for my retirement account, not swing or day trading -- I look at these indicators (and I provide a brief synopsis of what I see using the SP500 (SPY) as an market index):

1. What's called a curve chart. This will give me an idea whether prices tend to be expensive, or cheap. 

Based on a weekly chart, stocks are expensive. They can still go higher, but may hit some resistance. 

2.  The overall trend. Is it up, sideways, or down.

Based on a daily chart, the trend is up. However, looking a little bit more short-term, on a 60-minute chart, the trend may be reversing, based on the last week of trading. (See chart below).  

3. Short-term trend chart, looking for entry and exit points. (Short-term is relative to the investor; it could be hours, days or weeks).

I'm looking for confirmation of the trend mentioned in #2 above. The price of the future contracts for the SP500 has moved through and below a supply area of 2971. If it continues and breaks below 2963, I might look at this as a trend reversal.

4. Earnings. Investors can bid prices up or down based on emotional issues, like world-wide events or what the Fed is doing, but long term, the underlying factor of stock prices is company earnings.

Only about 15% of companies have reported Q2 earnings, so this is still up in the air. Earnings were a little softer in Q1 2019 vs. Q1 2018, so it will be worth paying attention to this. Generally, I only look at earning in detail when I'm doing my fundamental analysis of individual companies. 

5. The Shiller PE Ratio and the Buffet Indicator. These will indicate whether the overall market is overpriced.

The Shiller ratio is at 30.36. The mean is 15.73. Stocks are relatively expensive. The Buffet indicator (145) shows stocks as significantly overvalued. A value of 100 means stocks are fairly valued. 

6. The economy. I look at housing, consumer spending, LEI and interest rates. You can follow these on Econoday, which provides information on many reports. 

Based on the above indicators, for my own personal retirement accounts, I've place stop orders on my stock and bond positions, and two sold off this week. This protects profits. I may buy back in a cheaper prices. Otherwise, its a hold and wait. I am not buying anything new at this time. I have about 50 percent of my funds in money markets. 

A trend reversal may be in the making. 







Comments

Popular posts from this blog

What happened when a Trump Supporter Challenged Me About the Wall

Vicky Alvear Schecter wrote in Medium | Poltics on Dec. 27, 2018 using her headline above. I thought it was pretty well written -- at least she made an attempt to keep her liberal bias out of it -- regardless of a few illogical fallacies

But she does make an attempt, in an effort to avoid her liberal bias, as she ponders  "...in order not to be accused by bias, I explained that I would only use conservative sources to prove my point."

To me, that's bias to start out with that premise. And I believe her premise is that she is against the wall. That's her stance. But she makes some good points, but some are skewed, even though she attempt to take a "conservative" approach, even by citing some "conservative" sources in her footnotes.

Here's the first problem: if she wanted to avoid bias, why not just stick to the the historical facts as written (when you can find them without bias), and not concern oneself with bias. "I must reject that becau…

Weekly wrap for Nov 9

After Thursday and Friday, it might seem the markets are down, but the weekly numbers tell a different story, with the three major indices up for the week. The Nasdaq, with its tech exposure, had the smallest increase. The tech sector is obviously under recent pressure. 

IndexNov 2Nov 9+/-%S&P 5002,723.062,781.01+ 57.95+ 2.12%Nasdaq7,356.997,406.90+ 49.91+ 0.67%DOW 3025,270.8325,989.30+ 718.47+ 2.84%
Over the last 12 months, the Dow is up 10.77 percent, the SP 500 up 7.6 percent, and the Nasdaq up 9.7 percent.  

The weekly chart of the SPY still indicates a long position in the broader market. (The blue line is the 34-week moving average; the red is the 13-week moving average).

















While the U.S. economy still seems to be just fine from most reports, investors seemed to worry about a couple of things on Thursday and Friday: 1) The Eurozone, 2) trade with China, and 3) the Fed and interest rates. Another topic of interest has been oil. 

First, it seems that the Fed has really not indicated …

U.S. Top Oil Producer, Thanks to Obama

\ You read that right.

The U.S. is now the largest oil producer in the world, according to the EIA, producing some 15 million BOE per day, surpassing Russia and Saudi Arabia. (Remember back when Jimmy Carter said in 1979 the answer to our energy problems was to wear a warmer sweater...but you probably don't. He actually said this on national TV).

The United States is the top oil-producing country in the world, with an average of 14.86 million b/d, which accounts for 15.3% of the world's production. This is down from 15.12 million b/d in 2015, but it was enough to land the United States in the No. 1 spot, which it has held for the past four years running. (Source: Investopedia.)

Guess who takes credit for it? Granted, this increase in production began in 2012, but only because of private industry and the fact that the price of oil was at nearly all-time highs. And it dipped in 2016 because of Obama's anti-oil policies! 

But here he is again


Former President Barack Obama sure l…