• 16 hours Why Chinese Rare Earth Prices Are Soaring
  • 2 days 2021 Could Be A Huge Year For Chinese Stocks
  • 3 days Shadowy Brokers Target Easy TikTok Money In New Scheme
  • 4 days Cannabis Sales Are Soaring In The United States
  • 5 days Biden Will Be A Boon For Solar Stocks
  • 6 days The Shroom Boom Is Here To Stay
  • 9 days The Gold Rally Has Finally Run Out Of Steam
  • 9 days Citibank Analyst Predicts $300k Bitcoin By End Of 2021
  • 12 days Bitcoin Lives Up To Its Safe Haven Status In A Big Way
  • 12 days 14 Million People Will Lose Unemployment Benefits On December 31st
  • 14 days Why 12 Million American Millionaires Isn’t Good News
  • 15 days Big Oil Is Paying The Price For Investing In Renewables
  • 16 days The Banking Industry’s $35 Billion Gravy Train Could Disappear
  • 17 days Did Amazon Just Democratize Prescription Drugs?
  • 18 days The Private Space Race Just Got Very Real
  • 20 days Short Sellers Are Willing Big In This Turbulent Market
  • 21 days SpaceX Gets Go-Ahead To Send Humans Into Space
  • 22 days Saudi Arabia Lost $27 Billion In Oil Crash
  • 23 days China’s Big Tech Takes A Hit As Regulators Crack Down
  • 24 days Black Friday Could Be Retailers’ Only Hope
What's Behind The Global EV Sales Slowdown?

What's Behind The Global EV Sales Slowdown?

An economic slowdown in many…

How The Ultra-Wealthy Are Using Art To Dodge Taxes

How The Ultra-Wealthy Are Using Art To Dodge Taxes

More freeports open around the…

Prieur du Plessis

Prieur du Plessis

With 25 years' experience in investment research and portfolio management, Dr Prieur du Plessis is one of the most experienced and well-known investment professionals in…

Contact Author

  1. Home
  2. Markets
  3. Other

Stock Market - Liquidity and Long-Term Technical Indicators Still Bullish

"The end game for this bullish phase [on stock markets] needs to be considered well before the event. While the timing is largely guesswork at this stage, the usual causes are not. Bull markets are usually assassinated by tighter monetary policy," said David Fuller (Fullermoney) from across the pond.

"A good, although not precise, indicator of bear market risk will be provided by the yield curve, currently showing the premium of US 10-year over 2-year government yields. Years often go by before this chart shows anything important but it should not be forgotten by any of us. When this next approaches 0.0, we should have at least trailing stops, mental or actual, for all of our equity long positions. When it inverts to negative, indicating that 2-year rates are higher than 10-year rates, and the longer it stays negative, the more we should assume that a bear market is approaching.

US 10-Year Bond Yield
Source: Fullermoney.com

The good news today, is that the next inverted yield curve is probably a while away. Consequently, it would most likely take a true "black swan" to derail the current bull market anytime soon. These are unpredictable by definition so I would not worry about them without evidence of a game-changing event," said Fuller.

The chart below shows the long-term trend of the S&P 500 Index (green line) together with a simple 12-month rate of change (ROC) indicator (red line). Although monthly indicators are of little help when it comes to market timing, they do come in handy for defining the primary trend. An ROC line below zero depicts bear trends as experienced in 1990, 1994, 2000 to 2003, and in 2007. And 2011? With the ROC fairly comfortably above the zero line, the primary bullish trend remains intact.

S&P500
Source: StockCharts.com

Having said the above, a short-term correction could happen at any time in the light of the overbought charts and stretched fundamentals.

 


Did you enjoy this post? If so, click here to subscribe to updates to Investment Postcards from Cape Town by e-mail.

 

Back to homepage

Leave a comment

Leave a comment