Showing posts with label Stoxx. Show all posts
Showing posts with label Stoxx. 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.



Get our latest FREE eBook "Understanding Options"....Just Click Here!

Tuesday, September 20, 2011

Bloomberg: Crude Oil Gains for First Time in Three Days

Crude oil rose for the first time in three days as advancing European equity markets eased concern that the region’s debt crisis is damping demand for fuel, while investors bet that some supplies may be at risk.

Futures in New York gained as much as 1.4 percent, halting a slide of more than 4 percent in the previous two trading days, as the Stoxx Europe 600 index advanced 1.6 percent. Opposition fighters in Libya continued to battle loyalists at the town of Bani Walid and the city of Sirte, while anti government protests in Yemen left 50 people dead this week.

“Given the scale of the price fall, we are seeing some buying interest out there,” said Amrita Sen, a London based analyst at Barclays Plc. “The fundamentals still look robust with demand, even after slowing down, outpacing supply growth.”

Oil for October delivery on the New York Mercantile Exchange gained as much as $1.21 to $86.91 a barrel and was at $86.75 a barrel at 12:48 p.m. London time. The contract fell 2.6 percent yesterday and will expire today. The more actively traded November future was up $1.02 at $86.83 a barrel.

Brent crude for November settlement was up $1.40 at $110.54 a barrel on the ICE Futures Europe exchange in London. The contract yesterday fell 2.7 percent to $109.14 a barrel. The European benchmark future was at a premium of $23.67 to the November price of West Texas Intermediate, compared with a record settlement of $26.87 on Sept. 6......Read the entire Bloomberg article.


Get Our Stock Research & Trading Alerts....Jus Click Here!

Tuesday, August 4, 2009

Oil Falls From Seven Week High on Concern Recent Gains Overdone

Crude oil fell from a seven week high on speculation that gains of 13 percent in the past three days weren’t supported by an improvement in demand. Crude stockpiles in the U.S., the world’s biggest energy consumer, probably increased for a second week, according to a Bloomberg News survey before tomorrow’s Energy Department report. Oil futures declined as equity indexes slipped in Europe, where the Stoxx 600 dropped 0.9 percent. “The actual situation in the oil market doesn’t justify levels about $70,” said Hannes Loacker.....Complete Story
Stock & ETF Trading Signals