Indicators of a Market Top

Market tops tend to have three characteristics in common, and only one of them is reflected in the current environment, according to a recent article in Barron’s. The article cites comments by columnist Mark Hulbert, who refers to valuation metrics such as P/E, price-book, price-sales and price-dividend ratios as weak indicators of market tops but adds that we ignore them “at our peril, since it’s also true that almost all bull market tops in history have begun when they signal that the market has become overvalued.” Other indicators are: A “struggling” financial sector—The article cites Ned Davis Research data showing […]

Newsletter Writers are the Most Bullish in a Decade

The surge in positive sentiment about the market is increasingly misaligned with the reality of a slow-growing economy, according to last week’s Wall Street Journal. The article says that the share of newsletter writers that are optimistic regarding the stock market climbed to 62.7% this week (according to Investor Intelligence, a firm which provides weekly survey results from more than 100 newsletter writers). However, the article points out, “this gauge has become something of a contrarian indicator.”   Major stocks indexes have been pushed to record highs due in part to President Trump’s promises of deregulation, lower taxes and increased […]