Showing posts with label MSCI. Show all posts
Showing posts with label MSCI. Show all posts

Tuesday, September 22, 2015

Should You Worry That the Stock Market Just Formed a “Death Cross”?

By Justin Spittler

The world economy appears to be stalling. Yesterday we got news that South Korea’s exports dropped 14.7% since last August, their largest decline since the financial crisis. It’s far worse than the 5.9% drop economists were expecting.

South Korea’s exports are important because they’re considered a “canary in the coalmine” for the global economy. South Korea is a major exporter to the largest economies in the world including China, the US, and Japan. South Korea also releases its export numbers much earlier than other major countries. That’s why a bad reading for South Korean exports is often the first sign that the global economy is in trouble.

The ugly news slammed stocks around the world. Chinese stocks dropped 1.3%, Japanese stocks dropped 3.8% and the major indexes in Germany, the United Kingdom, France, and Spain all lost at least 2%.

These big drops came one day after the worst month for global stocks in over three years..…

Regular Casey readers know last month’s selloff hit every major stock market on the planet. China’s Shanghai index lost 12%. Japan’s Nikkei lost 7.4% and Europe’s STOXX 600 lost 8.5%.

The MSCI All-  Index, a broad measure of the global stock market, fell 6.8%. Its worst month since 2012. US stocks also fell hard. The S&P 500 lost 6.3% in August. And the Dow Jones Industrial Average fell 6.6%. It was the Dow’s worst month since May 2010, and its worst August in 17 years.

Bearish signs are popping up everywhere..…

Last month’s crash dropped the S&P 500 below an important long term trend line. A long term trend line shows the general direction the market is heading. Many professional traders use it to separate normal market gyrations from something bigger. Think of it as a “line in the sand.”

The market is constantly going up and down. But as long as we’re above the long term trend line, the dominant trend is still “up.” But when a selloff knocks the stock market below its long term trend line, it’s a sign the trend might be changing from up to down.

As you can see from the chart below, there have been a few “normal” selloffs since 2011. On Friday, however, the S&P dropped below its long-term trend line for the first time in about 4 years.



The broken trend line isn’t the only bearish sign we see right now.....

US stocks are also very expensive. Robert Shiller is an economics professor at Yale University and a widely respected market observer. Shiller is best known for creating the CAPE (Cyclically Adjusted Price Earnings) ratio. It’s a cousin of the popular price to earnings (P/E) ratio.

The P/E ratio divides the price of an index or stock by its earnings per share (EPS) for the past year. A high ratio means stocks are expensive. A low ratio means stocks are cheap.

The CAPE ratio is the price/earnings ratio with one adjustment. Instead of using just one year of earnings, it incorporates earnings from the past 10 years. This smooths out the effects of booms and recessions and gives us a useful long term view of a stock or market.

Right now, the S&P’s CAPE ratio is 24.6…about 48% more expensive than its average since 1881.


  
US stocks have only been more expensive a handful of times..…

Shiller explained why he’s worried in a recent New York Times op-ed: The average CAPE ratio between 1881 and 2015 in the United States is 17; in July, it reached 27. Levels higher than that have occurred very few times, including the years surrounding the stock market peaks of 1929, 2000 and 2007. In all three of these instances, the stock market eventually collapsed.

For the S&P’s CAPE ratio to decline to its historical average, the S&P would have to drop to around 1,300. That would be a disastrous 34% plunge from today’s prices. To be clear, this doesn’t mean a crash is imminent. Like any metric, the CAPE ratio isn’t perfect. CAPE is helpful for spotting long-term trends, but it can’t “time” the market.

But the high CAPE ratio is one more reason you should be extra cautious about investing in US stocks right now.

It also means you should take steps to prepare..…

As we write on Tuesday afternoon, stock markets around the world are in a free fall. The S&P 500 dropped another 3% today. On top of that, the current bull market in US stocks is now one of the longest in history. It’s already two years longer than the average bull market since World War II.

And as we’ve explained, according to the CAPE ratio, US stocks are overpriced. We can’t tell you for sure when the next financial crisis will hit. No one can.

But we do urge you to prepare. What’s happening right now shows how fragile the markets are. You shouldn’t ignore the mounting evidence that our financial markets just aren’t healthy. We lay out every step you should take to prepare for the next financial crisis in our book, Going Global 2015.

This important book shows you how to get your wealth out of harm’s way and profit from the next financial disaster. It’s must-read material for anyone who’s serious about “crisis-proofing” their wealth. Right now, we’ll send it to you for practically nothing…we just ask that you pay $4.95 to cover processing costs. Click here to claim your copy.



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Thursday, June 3, 2010

Crude Oil Rises a Second Day on U.S. Home Sales Growth, Crude Stockpile Decline

Oil gained for a second day in New York after U.S. home sales rose and an industry funded report showed a decline in the country’s gasoline inventories, bolstering optimism that the economic recovery will accelerate. Oil advanced as the Standard & Poor’s 500 Index climbed after pending sales of existing homes rose to the highest level since October.

The American Petroleum Institute said last week’s gasoline supplies fell to the lowest this year. “The flow of data from the U.S. is still on the positive side, suggesting recovery,” said Toby Hassall, commodity analyst at CWA Global Markets Pty in Sydney. “If we start to see inventories decline in line with their seasonal pattern then that should offer support to the market.”

Crude oil for July delivery increased as much as $1.03, or 1.4 percent, to $73.89 a barrel in electronic trading on the New York Mercantile Exchange, and was at $73.77 at 1:36 p.m. Singapore time. Yesterday, the contract rose 28 cents, or 0.4 percent, to settle at $72.86. The S&P 500 increased 2.6 percent yesterday. That has pushed Asia stocks higher today with the MSCI Asia Pacific Index climbing the most since February. The index of pending U.S. home sales gained 6 percent after they were projected to rise 5 percent in April, according to the median of 40 forecasts in the Bloomberg survey.

“The economic numbers out of the U.S. have been improving gradually this month,” said Serene Lim, an energy commodity strategist at Australia & New Zealand Banking Group Ltd. in Singapore. “Yesterday’s API data was quite encouraging. We’ll have to see if the Department of Energy numbers match that, especially if the Cushing inventories fall”....Read the entire article.

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Tuesday, March 2, 2010

Crude Oil Rises to Seven Week High as Global Equity Markets Advance


Crude oil rose to a seven week high as equity markets advanced, increasing optimism that a growing global economy will bolster fuel demand. Oil climbed as much as 2.9 percent as the MSCI Emerging Markets Index climbed to its highest level in five weeks after India’s economy improved. The gain accelerated as the dollar weakened against the euro, raising demand for commodities as an alternative investment.

“We are seeing new fund money come into commodities,” said Carl Larry, president of Oil Outlooks & Opinions LLC in Houston. “Everyone is focused on growth and how best to profit from it. There are still a lot of jobless but the economy has begun to grow.” Crude oil for April delivery rose $1.93 or 2.5 percent, to $80.63 a barrel at 1:12 p.m. on the New York Mercantile Exchange. Futures touched $80.95, the highest level since Jan. 12. Prices have doubled from a year earlier.

Oil has traded between $69.50 and $83.95 a barrel this year. Futures have topped $80 every day since Feb. 19. “This is still a range-bound market,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “We are testing the top end of the range right now on some positive economic sentiment, but it’s questionable whether we can actually break through.”

“There’s no single news item behind today’s move,” said Tom Bentz, a broker at BNP Paribas Commodity Futures Inc. in New York. “We’ve been trading between $77 and the $85.50 area for the last week and have finally poked through on the upside. It is questionable if it can continue to advance from here”.........Read the entire article.


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