5 Things To Ponder: The Interest Rate Conundrum Click to view

August 1st, 2014 Lance Roberts

After several months of quite complacency, investors were woken up Thursday by a sharp selloff driven by concerns over potential rising inflationary pressures, rising credit default risk and weak undertones to the economic data flows. One of the primary threats that has been readily dismissed by most analysts is the impact from rising interest rates. Last week, the following chart was circulated again which shows that stocks perform well during rising interest rate environments:

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Getting Technical: Weekend Update Click to view

August 1st, 2014 Serge Perreault

Here’s the latest weekend update from Serge Perreault, a Chartered Professional Accountant and market technician located near Montreal, Canada. Serge has been following the U.S. market in a series of weekly charts. Here is his update on the S&P 500.

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S&P 500 Snapshot: Worst Weekly Decline Since May 2012 Click to view

August 1st, 2014 Doug Short

Today's market was subject to a veritable flood of economic data. After yesterday's two percent plunge, the market was clearly confused. The S&P 500 opened lower, rallied for 30 minutes to its 0.35% intraday high and then sold off to its -0.74% intraday low shortly before the noon hour. During the afternoon it recovered to a fractional gain and then slipped to its 0.29% closing loss. The index was down 2.69% for the week, its worst weekly decline since its -3.02% selloff at the end of May 2012.

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The Latest on Real Disposable Income Per Capita Click to view

August 1st, 2014 Doug Short

With this morning's release of the June Personal Incomes and Outlays we can now take a closer look at "Real" Disposable Personal Income Per Capita.

The June nominal 0.37% month-over-month increase shrinks to 0.12% when we adjust for inflation. The year-over-year metrics are 3.21% nominal and 1.58% real.

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The Big Four Economic Indicators: Nonfarm Employment and Real Personal Income Click to view

August 1st, 2014 Doug Short

This morning we got updates for two of the Big four: Nonfarm Employment for July and Real Personal Income less Transfer Payments for June....

The chart and table below illustrate the performance of the Big Four with an overlay of a simple average of the four since the end of the Great Recession. The data points show the cumulative percent change from a zero starting point for June 2009. We now have the first indicator update for the 61th month following the recession.

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Inside the Latest Employment Report Click to view

August 1st, 2014 Mike Shedlock

Nonfarm Payrolls 209,000, Unemployment 6.2%, Employed +131,000

Counting the upwardly revised 298,000 nonfarm payroll report in June (originally reported as 288,000), this was a decent report.

Yet, digging into the details, the household survey showed a gain in employment of only 131,000. Thus, for the second consecutive month, the household survey was substantially weaker than the headline number.

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Liquidity Crunch Warning Finally Materialized Click to view

August 1st, 2014 Dwaine Van Vuuren

Fifteen trading days after our Average Liquidity Index (ALI) issued a liquidity crunch warning, the SP-500 finally succumbed into a decent sized correction. The two short-term liquidity indexes, one of which is described in “The HI-LO Breadth Indexes for the SP-500” issued warning even sooner, as can be seen below:

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The Unemployment Rate Is Not Signaling a Recession: Update Click to view

August 1st, 2014 Georg Vrba

A reliable source for recession forecasting is the unemployment rate, which can provide signals for the beginnings and ends of recessions. The unemployment rate model, updated with the July figure of 6.2%, does not signal a recession now.

The model relies on four indicators to signal recessions:

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The Message from Small & Mid Caps Click to view

August 1st, 2014 Chris Kimble

The 2-pack below shows that the Russell 2000 and Mid Cap 400 ratios against the S&P 500 could be breaking support dating back a decade. The "Power of the Pattern" highlighted this past weekend illustrated that a rare situation that was taking place in the Russell/SPY ratio.

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ISM Manufacturing Index: Moderate Growth Continues Click to view

August 1st, 2014 Doug Short

Today the Institute for Supply Management published its July Manufacturing Report. The latest headline PMI at 57.1 came in well above last month's 55.3 percent and above the Investing.com forecast of 56.0.

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July Michigan Consumer Sentiment at Four-Month Low Click to view

August 1st, 2014 Doug Short

The Final University of Michigan Consumer Sentiment for July came in at 81.8, a decline from the June final of 82.5 and the lowest reading since March. Today's number came in slightly below the Investing.com forecast of 82.0.

See the chart below for a long-term perspective on this widely watched indicator. I've highlighted recessions and included real GDP to help evaluate the correlation between the Michigan Consumer Sentiment Index and the broader economy.

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PCE Price Index: Headline and Core Little Changed, Remain Below Target Click to view

August 1st, 2014 Doug Short

The latest Headline PCE price index year-over-year (YoY) rate of 1.60%, down from the previous month's 1.66% (a downward adjustment from 1.77%). The Core PCE index of 1.49% is is a downward ajustment from 1.53% (an upward revision from previous month's 1.49%.

The adjacent thumbnail gives us a close-up of the trend in YoY Core PCE since January 2012. I've highlighted the narrow 12-month range that has been breached to the upside for the past three months.

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209K New Nonfarm Jobs in July, Unemployment Rate Rises to 6.2% Click to view

August 1st, 2014 Doug Short

Today's report of 209K new nonfarm jobs was below the Investing.com forecast of 233K. The unemployment rate rose from 6.1% to 6.2%. The Investing.com expectation was an unchanged 6.1%....

The labor force participation rate at 62.91% is fractionally off the interim low of 62.76% set in October of last year. Today's level was first seen in the Spring of 1978.

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3 Things Worth Thinking About (Volume 2) Click to view

July 31st, 2014 Lance Roberts

Last week, I started a new weekly series entitled "3 Things Worth Thinking About." The focus here will be three things, ironically enough, that are worth considering with respect to your portfolio and related investments. As I have discussed many times previously, focusing only on "bullish" commentary when markets are rising is really of little use as it creates a "blind spot" to related investment risks. The same goes for when markets are falling. These cognitive biases get in the way of making logical and disciplined investment decisions....

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A Perspective on Today's Market Drama Click to view

July 31st, 2014 Jason B. Leach

The market began to sell off significantly in the overnight futures session last night (waking me as the S&P futures hit an alert I had set just 15 minutes before).

I arose to determine the cause(s) of the sell-off, and later the acceleration of the sell-off once the cash market opened this morning.

The causes include:

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Moving Averages: Month-End Update Click to view

July 31st, 2014 Doug Short

Valid until the market close on July 31, 2014

The S&P 500 closed July with a monthly loss of 1.41%. All three S&P 500 MAs and four of the five the Ivy Portfolio ETF MAs are signaling "Invested".

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August 1914: When Global Stock Markets Closed Click to view

July 31st, 2014 Bryan Taylor

This week marks the hundredth anniversary of the beginning of World War I. On June 28, 1914, Austrian Archduke Franz Ferdinand was assassinated in Sarajevo. This event led to a month of failed diplomatic maneuvering between Austria-Hungary, Germany, France, Russia, and Britain which ended with the onset of the Great War, as it was originally called.

Austria-Hungary declared war on Serbia on July 28, causing Germany and Russia to mobilize their armies on July 30. When Russia offered to negotiate rather than demobilize their army, Germany declared war on Russia on August 1.

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The BEA's Q2 GDP: A Deeper Analysis Click to view

July 31st, 2014 Rick Davis

In their first estimate of the US GDP for the second quarter of 2014, the Bureau of Economic Analysis (BEA) reported that the economy was growing at a +3.94% annualized rate. When compared to the prior quarter, the new measurement is up over 6% from a -2.11% contraction rate for the 1st quarter of 2014 (which was itself revised upward +0.83% from a previously reported -2.94% contraction). This is the largest positive quarter to quarter improvement in GDP growth in some 14 years.

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How Long to the Next Recession? iM’s Weekly Update Click to view

July 31st, 2014 Anton Vrba and Georg Vrba

The BCI at 175.7 is down from last week’s downward revised 176.1. The BCIg, the smoothed annualized growth of BCI, at 19.0 is unchanged from last week's downward revised level. These downward revisions are attributed to the Census Board revised figures for 'New One Family Houses Sold', which is one of the input data series to BCI. However, BCI does not indicate a possible recession in the near future.

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A Tipping Point in Europe? Would It Impact the US? Click to view

July 31st, 2014 Chris Kimble

Three popular stock indexes in Europe are giving multi-year rising support a heck of a test of late. Each index may have created a rising wedge, which two-thirds of the time suggests lower prices are ahead.

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New Jobless Claims Rebound from Last Week's Low Click to view

July 31st, 2014 Doug Short

A big jump in new claims this week was partly the result of a 5K downward adjustment to last week's claims. On a more positive note, the four-week moving average is the lowest since April 2006. Here is the opening statement from the Department of Labor....

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Moving Averages: Month-End Preview Click to view

July 31st, 2014 Doug Short

Here is a preview of the monthly moving averages I track after the close of the last business day of the month. All three S&P 500 strategies are now signaling "invested" -- unchanged from last month. One of the five of the Ivy Portfolio ETFs, the PowerShares DB Commodity Index Tracking (DBC), has switched from "invested" to Cash.

If a position is less than 2% from a signal, it is highlighted in yellow.

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The Trillion Dollar Question: What Happens When Quantitative Easing Ends? Click to view

July 30th, 2014 Cris Sheridan

One of the great questions being debated right now is how will the market react once QE3 ends this October. Those who believe asset prices (namely stocks, bonds, and real estate) are being supported by the Fed, and not by underlying economic growth, expect a correction or worse once the Fed withdraws its support.

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GDP - Pre/Post Annual Revisions In Pictures Click to view

July 30th, 2014 Lance Roberts

Today's GDP release of data also included annual revisions. These revisions are almost always overlooked by analysts since they are "past history" but provide an interesting perspective on how far the estimates have been away from reality. The charts below show both the pre- and post-2014 revisions to the data to provide some context to the economic strength/weakness debate.

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Visualizing GDP: Dissecting the Q2 Advance Estimate Click to view

July 30th, 2014 Doug Short

The chart below is my way to visualize real GDP change since 2007. I’ve used a stacked column chart to segment the four major components of GDP with a dashed line overlay to show the sum of the four, which is real GDP itself....

Here is the latest overview from the Bureau of Labor Statistics:

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Real GDP Per Capita Rises to 3.31% Click to view

July 30th, 2014 Doug Short

Earlier today we learned that the Advance Estimate for Q2 2014 real GDP came in at 3.95 percent (rounded to 4 percent), up from -2.1 percent for the revised Q1 data and well above most forecasts. Real GDP per capita was somewhat lower at 3.31 percent.

Here is a chart of real GDP per capita growth since 1960. For this analysis I’ve chained in today’s dollar for the inflation adjustment. The per-capita calculation is based on quarterly aggregates of mid-month population estimates by the Bureau of Economic Analysis.

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Anticipating the Employment Report for July Click to view

July 30th, 2014 Doug Short

With the Q2 GDP report now history, attention will focus on the Friday employment report from the Bureau of Labor Statistics. This monthly report contains a wealth of data for economists, probably the most publicized in the near term being the month-over-month change in Total Nonfarm Employment (the PAYEMS series in the FRED repository).

Today we have another curious pair of July estimates: 218K new nonfarm private employment jobs from ADP and a much larger 306K total new jobs from TrimTabs.

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Q2 GDP at 4.0% Soars Above Expectations Click to view

July 30th, 2014 Doug Short

The Advance Estimate for Q2 GDP, to one decimal, came in at 4.0 percent, and the annual revision for Q1 GDP lifted it from -2.9 percent to -2.1 percent. The Advance Estimate of the GDP deflator used to calculate real (inflation-adjusted) GDP rose to 1.9 percent from an upwardly revised 1.4 percent in Q1 (previously 1.3 percent). Investing.com had forecast 3.0 percent for today's GDP estimate and the deflator to rise from the Q1 1.3 percent to 1.8 percent.

The general consensus among economists was the vicinity of 3.0 percent.

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The End of QE: Some Common Misunderstandings Click to view

July 29th, 2014 Lance Roberts

I have discussed for some time that there are a couple of inherent misunderstandings about the Federal Reserve's ending of the current large-scale asset purchase program (LSAP), or more affectionately known as Quantitative Easing (QE). The first is "tapering is not tightening" and the second is "interest rates will rise." Let me explain.

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Thoughts Ahead of Tomorrow's Advance Estimate of Q2 GDP Click to view

July 29th, 2014 Doug Short

The big economic announcement tomorrow with be the Advance Estimate of Q2 GDP. Recall that the Advance Estimate of 0.1% for Q1 GDP underwent two downward revisions: -1.0% in the first revision and -2.9% in the second revision. Mainstream economists have been generally optimistic that the contraction in Q1 GDP was attributable to an unusually severe winter and that Q2 would show a significant bounce. The Investing.com estimate is for 3.0%. Briefing.com has a consensus of 3.2%, and its own forecast is for an even stronger 3.7%.

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Consumer Confidence Surges; Highest Since the 2007 Market Peak Click to view

July 29th, 2014 Doug Short

The Latest Conference Board Consumer Confidence Index was released this morning based on data collected through July 17. The headline number of 90.9 was an improvement over the revised June final reading of 86.4, an upward revision from 85.2. Today's number dramatically beat the Investing.com forecast of 85.3. The current level is the highest since October 2007, the month the S&P 500 peaked prior to the Great Recession.

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Gasoline Price Update: Down Another Five Cents Click to view

July 28th, 2014 Doug Short

It's time again for my weekly gasoline update based on data from the Energy Information Administration (EIA). Rounded to the penny, Regular and Premium both dropped another five cents, the fourth week of price declines. Regular is up 35 cents and Premium 34 cents from their interim lows during the second week of last November.

According to GasBuddy.com, two states (Hawaii and Alaska) have Regular above $4.00 per gallon, down from three last week, and three states (California, Oregon, Washington) are averaging above $3.90, unchanged from last week.

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NYSE Margin Debt Surged in June; Leading Indicator for a Market Correction? Click to view

July 28th, 2014 Doug Short

Note from dshort: The NYSE has released new data for margin debt, now available through June.

The latest data inflation-adjusted data, up 5.7%, is the largest increase in 17 months.

There are too few peak/trough episodes in this overlay series to take the latest credit-balance data as a leading indicator of a major selloff in U.S. equities. But we'll definitely want to keep an eye on this metric in the months ahead.

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Real Median Household Income Rose 0.69% in June Click to view

July 28th, 2014 Doug Short

Summary: The Sentier Research monthly median household income data series is now available for June. The nominal median household income was up $506 month-over-month but up only $1,791 year-over-year. Adjusted for inflation, it was up $368 MoM and only $710 YoY. The real numbers equate to a 0.69% MoM increase and a 1.34% YoY increase. June marks the second month of real increases following two months of declines.

In real dollar terms, the median annual income is 6.6% lower (about $3,800) than its interim high in January 2008.

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Vehicle Miles Driven: A Structural Change in Our Driving Behavior Click to view

July 28th, 2014 Doug Short

The Department of Transportation's Federal Highway Commission has released the latest report on Traffic Volume Trends, data through May.

Travel on all roads and streets changed by 0.9% (2.4 billion vehicle miles) for May 2014 as compared with May 2013. The less volatile 12-month moving average is up 0.07% month-over-month. If we factor in population growth, the 12-month MA of the civilian population-adjusted data (age 16-and-over) is down 0.01% month-over-month and down 0.3% year-over-year.

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An lndustral Reversal at Hand? Click to view

July 28th, 2014 Chris Kimble

The Industrial ETF XLI may have created a "Bearish Wick" on a monthly basis at its Fibonacci 161% Extension level at (1) last month. Over the past year, XLI has reflected relative strength compared to the broad market. Over the past 30 & 90 days, XLI has shown a bit of relative weakness.

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The Problem with Reality in 2014 Click to view

July 28th, 2014 Michael Lombardi

Earlier this month, Jeremy Siegel, a well-known “bull” on CNBC, took to the airwaves to predict the Dow Jones Industrial Average would go beyond 18,000 by the end of this year. Acknowledging overpriced valuations on the key stock indices are being ignored, he argued historical valuations should be taken with a grain of salt and nothing more. (Source: CNBC, July 2, 2014.)

Sadly, it’s not only Jeremy Siegel who has this point of view.

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Tracking the Market with Social Media Click to view

July 27th, 2014 Blair Jensen

The Downside Hedge Twitter Sentiment Indicator for the S&P 500 Index (SPX) has moved to TradeFollowers.com and been renamed Trade Followers Momentum. When we first conceived the idea to capture stock market information from the Twitter stream, we thought we’d mostly find opinions and future projections. As a result, we thought we were creating a sentiment indicator. After two years of studying the underlying data, we believe we’ve created a momentum indicator that captures a herding effect by market participants.

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World Markets Weekend Update: A Surge in the East Click to view

July 27th, 2014 Doug Short

Six of the eight indexes on my world markets watch list posted gains for the week with the Asia-Pacific contingent taking the top four spots. China was the big winner, with the Shanghai Composite and Hang Seng both gaining over three percent. India's SENSEX was a distant third with a 1.89% gain and Japan's Nikkei rose 1.59%. The two Eurozone indexes finished in the red.

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Weekly Market Summary Click to view

July 26th, 2014 Urban Carmel

Barring a 50 point drop next week, SPX will close July higher. This will the 6th month in a row that SPX has closed up.

Investors are used to higher US indices. In the past 27 months, SPX has had only 4 down months. That's an 85% win rate.

It's easy to believe, then, that this is unexceptional. Yet it is. It's not the streak itself that's so remarkable, it's the context in which it has been achieved.

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Small Caps Signaling Caution? Click to view

July 26th, 2014 Chris Kimble

The top line in the accompanying chart represents the Russell 2000/SPY ratio. A 6-year support broke at (1). Soon after that the S&P 500 broke below a multi-year support line at (2), which was followed by softness.

Now the Russell 2000/SPY ratio is breaking a 13-year support line of late.

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Five Decades of Middle Class Wages Click to view

July 26th, 2014 Doug Short

Here's a perspective on personal income for production and nonsupervisory private employees going back five decades.

The Bureau of Labor Statistics has been collecting data on this workforce cohort since 1964. The government numbers provide some excellent insights on the income history of what we might think of as the private middle class wage earner.

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5 Things To Ponder: Gates & Houses Click to view

July 25th, 2014 Lance Roberts

"The world is all gates, all opportunities, strings of tension waiting to be struck." - Ralph Waldo Emerson

This past week was inundated with a variety of financial and geopolitical events that had me scrambling to say abreast of the issues. However, there was one issue in particular that was obscured by the news flow of MH-17 and Israel, a ruling by the S.E.C. to put "gates" on mutual fund redemptions.

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The "Real" Goods on the Today's Durable Goods Data Click to view

July 25th, 2014 Doug Short

Earlier today I posted an update on the July Advance Report on June Durable Goods New Orders. This Census Bureau series dates from 1992 and is not adjusted for either population growth or inflation.

Let’s now examine the same data adjusted for both population growth and producer price inflation, which gives us the "real" durable goods orders per capita. The snapshots below offer a more useful historical context in which to evaluate the standard reports on the nominal monthly data.

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Consensus Building for 2016 Stock Market Bubble, Crash Click to view

July 25th, 2014 Cris Sheridan

The year 2016 will see a number of important events: the US presidential election, the Summer Olympics, and, according to a growing number of market analysts, another financial crisis.

Why? What’s so special about 2016? That’s the interesting thing -- they all have different reasons.

First, I have to admit, I didn’t realize this pattern until it reached a certain level of blatant obviousness when the always chipper Paul Farrell of MarketWatch recently wrote a piece titled, “Great Crash of 2016, third $10 trillion loss this century.”

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Joe Friday: Interest Rates Could Fall Another 20% Click to view

July 25th, 2014 Chris Kimble

The chart below highlights that yields on the 10-year note & 30-year bond are down on average of 17% this year, to the surprise of many. Would rates falling another 20% surprise a few investors? I suspect so!

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ECRI Recession Watch: Weekly Update Click to view

July 25th, 2014 Doug Short

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) is at 135.8, up from the previous week's 156.1. The WLI annualized growth indicator (WLIg) is unchanged at 4.2.

ECRI's relatively consistent stance on the economy contrasts rather sharply with the rather amazing spread of GDP forecasts from mainstream economists.

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Durable Goods Report: June Rebound Beat Click to view

July 25th, 2014 Doug Short

The July Advance Report on June Durable Goods was released this morning by the Census Bureau. Here is the Bureau's summary on new orders:

New orders for manufactured durable goods in June increased $1.8 billion or 0.7 percent to $239.9 billion, the U.S. Census Bureau announced today. This increase, up four of the last five months, followed a 1.0 percent May decrease. Excluding transportation, new orders increased 0.8 percent. Excluding defense, new orders increased 0.7 percent.

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Junk Bond Indigestion; Musical Chairs; Take Chips Off the Table? Click to view

July 24th, 2014 Mike Shedlock

The first half of 2014 sported record junk bond purchases by investors thirsty for yield, no matter how absurd the bond covenants or how risky the investment.

Things may have changed in July as the following chart shows, using JNK (the Barclays High Yield ETF) as a proxy for junk bonds.

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3 Things Worth Thinking About Click to view

July 24th, 2014 Lance Roberts

I spent a good deal of time yesterday going through a point-counterpoint analysis of the current bull market. However, there are a few things that have been sitting on my desk that I wanted to make some comments on, and given we are now winding up the week, this is a good day address them.

1) SEC Votes To Put "Gates" On Money Market Funds

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The Four Totally Bad Bear Recoveries: New Update Click to view

July 24th, 2014 Doug Short

Note from dshort: At the request of The Advisory Group in San Francisco, here’s updated comparison of four major cyclical bear markets. The numbers are through yesterday’s close.

The chart series features an overlay of the Four Bad Bears in U.S. history since the market peak in 1929. They are: 1) the Crash of 1929, 2) the Oil Embargo of 1973, 2) The 2000 Tech bust and 4) the post-2007 Financial Crisis. The series includes nominal, real, total-return and real total-return comparisons.

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How Long to the Next Recession? iM’s Weekly Update Click to view

July 24th, 2014 Anton Vrba and Georg Vrba

The BCI at 179.2 is up from last week’s 178.5. The BCIg, the smoothed annualized growth of BCI, at 22.2 is at its highest level in the current business cycle, rising from last week's 21.6. This week’s BCI does not indicate a possible recession in the near future.

>Figure 1 plots BCIp, BCI, BCIg and the S&P500 together with the thresholds (red lines) that need to be crossed to be able to call a recession.

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Bulls Take Notice - Caution Suggested as Credit Markets and Equity Markets Diverge Click to view

July 23rd, 2014 Chris Puplava

Summary

  • Divergence with small cap stocks and junk bonds persists.
  • Credit spreads widening suggests building short-term financial stress.
  • Markets oversold and how risk areas react will be telling.
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    Two Measures of Inflation and Fed Policy Click to view

    July 23rd, 2014 Doug Short

    I've updated the accompanying charts with yesterday's Consumer Price Index data from the Bureau of Labor Statistics. The annualized rate of change is calculated to two decimal places for more precision in the side-by-side comparison with the PCE Price Index.

    The BLS's Consumer Price Index for June shows core inflation at 1.93%. The Core PCE price index at the end of the May (the most recent data), is significantly lower at 1.49%. The Fed is on record as preferring the less familiar Core PCE as its inflation gauge.

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    Gasoline Volume Sales, Demographics and our Changing Culture Click to view

    July 23rd, 2014 Doug Short

    The Department of Energy’s Energy Information Administration (EIA) data on volume sales is over two months old when it released. The latest numbers, through mid-May, were published today. However, despite the lag, this report offers an interesting perspective on fascinating aspects of the US economy. Gasoline prices and increases in fuel efficiency are important factors, but there are also some significant demographic and cultural dynamics in this data series.

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    Inflating the Big Mac One Calorie at a Time Click to view

    July 23rd, 2014 James Cornehlsen

    Continuing our research into using the Big Mac as a gauge of inflation, we build on past posts but use our own research to draw conclusions. In previous articles, we have relied solely on The Economist’s calculation of the Big Mac price. The Economist has been conducting the research sporadically since 1986. However, it was not until a few years ago that they began regular updates to their research in both January and July. Believing this span is too great, we have compiled our own look at the price of the Big Mac in the United States.

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    Pssst ... A Breakout in China? Click to view

    July 23rd, 2014 Chris Kimble

    Many major stock indexes in the United States and Europe are either at all-time highs or near them. One sixth of the world's population can't make the same statement.

    The chart below illustrates that the Shanghai Index and the popular China ETF (FXI) have both greatly underperformed the S&P 500 over the past five years ... by more than 100%!

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    A Long-Term Look at Inflation Click to view

    July 22nd, 2014 Doug Short

    The July Consumer Price Index for Urban Consumers (CPI-U) released this morning puts the June year-over-year inflation rate at 2.07%, fractionally off last month's 2.13% 19-month high, but well below the 3.88% average since the end of the Second World War and 13% below its 10-year moving average.

    Let’s take a step back and look at the history of inflation over the past 140 plus years.

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    Real Retail Sales Per Capita: Another Perspective on the Economy Click to view

    July 22nd, 2014 Doug Short

    In real, population-adjusted terms, Retail Sales are at the level we first reached in September 2004.

    Last week the Advance Retail Sales Report showed that sales in June rose 0.2% month-over-month and 4.2% year-over-year, as I reported in my real-time update.

    With today's release of the Consumer Price Index, we can now dig a bit deeper into the "real" data, adjusted for inflation and against the backdrop of our growing population.

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    Inflation: A Six-Month X-Ray View Click to view

    July 22nd, 2014 Doug Short

    Here is a table showing the annualized change in Headline and Core CPI for each of the past six months. I’ve also included each of the eight components of Headline CPI and a separate entry for Energy, which is a collection of sub-indexes in Housing and Transportation.

    We can make some inferences about how inflation is impacting our personal expenses depending on our relative exposure to the individual components.

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    What Inflation Means to You: Inside the Consumer Price Index Click to view

    July 22nd, 2014 Doug Short

    Let’s do some analysis of the Consumer Price Index, the best known measure of inflation. The Bureau of Labor Statistics (BLS) divides all expenditures into eight categories and assigns a relative size to each. The pie chart below illustrates the components of the Consumer Price Index for Urban Consumers, the CPI-U, which I’ll refer to hereafter as the CPI.

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    June Inflation Largely Attributable to Gasoline Prices Click to view

    July 22nd, 2014 Doug Short

    The Bureau of Labor Statistics released the June CPI data this morning. Year-over-year unadjusted Headline CPI came in at 2.07%, which the BLS rounds to 2.1%, essentially unchanged from 2.13% the previous month. Year-over-year Core CPI (ex Food and Energy) came in at 1.96% (rounded to 2.0%), up from the previous month's 1.83%. Of particular interest is the fact that month-over-month Core CPI (less food and energy) rose only 0.05% (rounded to 1.0). The headline MoM increase was largely driven by higher gasoline prices (which have dropped eight cents per gallon over the last two weeks).

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    Third Time Is the Charm? Click to view

    July 21st, 2014 Alan Hartley

    The rule of three is a principle with various meanings. For writers, it suggests that topics, characters, or events that come in a group of three are funnier or more effective than if a different number was used. For the superstitious, the rule of three can be either positive or negative: “third time lucky” or “misfortunes never come singly”. We intend to unashamedly draw on both meanings below.

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    Understanding the CFNAI Components Click to view

    July 21st, 2014 Doug Short

    The Chicago Fed’s National Activity Index, which I reported on earlier today, is based on 85 economic indicators drawn from four broad categories of data:

    • Production & Income
    • Employment, Unemployment & Hours
    • Personal Consumption & Housing
    • Sales, Orders, & Inventories

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    Residential Mortgage-Backed Securities Are Heading Over a Cliff Click to view

    July 21st, 2014 Keith Jurow

    Non-Agency residential mortgage-backed securities (RMBS) are securitized mortgages that are not guaranteed by Fannie Mae or Freddie Mac or insured by the FHA.

    These non-guaranteed RMBS existed prior to the bubble years of 2005 - 2007, but the outstanding amount was relatively small. By early 2004, however, that number had climbed rapidly to $644 billion.

    Then the speculative mania began to really heat up. Subprime lenders enlisted an army of 50,000 mortgage brokerage firms to hawk loans to just about anyone who was breathing and could sign their name.

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    Bond Players Doubt the Fed Will Taper Click to view

    July 21st, 2014 Chris Kimble

    Coming into 2014, yields had just experienced the largest 18-month rally in 30 years! On Jan the 24th, the Power of the Pattern said their was a two-thirds chance bond prices would rally and yields would fall.

    Did the rally in yields get overdone over the past year and a half? The Power of the Pattern believed so....

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    Chicago Fed: Economic Growth Decelerated Slightly in June Click to view

    July 21st, 2014 Doug Short

    "Index shows economic growth decelerated slightly in June": This is the headline for today's release of the Chicago Fed's National Activity Index, and here are the opening paragraphs from the report:

    Led by slower growth in production-related indicators, the Chicago Fed National Activity Index (CFNAI) edged down to +0.12 in June from +0.16 in May. Two of the four broad categories of indicators that make up the index made nonpositive contributions to the index in June, but two of the four categories increased from May.

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    Gauging Investor Sentiment with Twitter: Weekly Update Click to view

    July 20th, 2014 Blair Jensen

    The Downside Hedge Twitter sentiment indicator for the S&P 500 Index (SPX) is still on a consolidation warning. Thursday’s events in Ukraine and Gaza shook the confidence of market participants on Twitter. The daily indicator printed a -20. Friday’s recovery of price didn’t bring with it a strong recovery from sentiment. It printed a -13 that day. Smoothed sentiment turned back down this week and is still below zero and back at the low that created the consolidation warning.

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    Weighing the Week Ahead: Can Earnings Growth Reignite the Stock Rally? Click to view

    July 20th, 2014 Jeff Miller

    To the surprise of many observers, stocks have survived a series of recent challenges. As Q214 earnings reports starts begin, the questions has changed:

    Can strong corporate earnings spark a renewed rally in stocks?

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    Weekly Market Summary Click to view

    July 19th, 2014 Urban Carmel

    SPY (daily) remains firmly in its up channel. That's the big trend to keep firmly in mind.

    That said, it's 13-ema inflected downward yesterday for the first time since mid May (bottom panel). We have noted this many times in the past: after the first inflection, there's often a bounce and then a lower low, or at least a period of sideways trading (yellow shading). Often, the 50-dma either catches up to price or price declines towards the 50-dma. In other woods, the shorter term trend is weakening.

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    5 Things To Ponder: Yellen Talk Click to view

    July 18th, 2014 Lance Roberts

    This past week, Chairwoman Janet Yellen presented the Federal Reserve's Semiannual Monetary Policy Report to the Congressional Committee on Banking, Housing, and Urban Affairs. While the financial markets were closely focused on clues as to the future direction of monetary policy and rate hikes, I jumped into the fray to address her comments regarding the current employment situation and outlook:

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    Listen to the Fed Click to view

    July 18th, 2014 Dominic Cimino

    In truth, the adage “It’s more important to watch a person’s actions rather than listen to his words” probably arose from man’s tendency to do the opposite and suffer the consequences. But when considering the correspondence our Federal Reserve Bank has with us as investors, I’m convinced it’s imperative to listen to Fed Chair Yellen’s words.

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    More Retirement Income with iM’s Improved Floor-Leverage Rule: 6.5% Safe Withdrawal Rate Click to view

    July 18th, 2014 Georg Vrba

    The original Floor-Leverage Rule for Retirement, as proposed by Scott and Watson, calls for two parallel investments. The first one is to establish a low risk Spending Floor Portfolio with 85% of one’s funds. The second, the Surplus Portfolio, is an investment of the remaining 15% in equities with 3× leverage. If the Surplus Portfolio exceeds 15% of the total portfolio value at annual rebalancing when withdrawals are made, it is adjusted to 15% of the total portfolio value with the excess being transferred to the Spending Floor Portfolio.

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    Joe Friday: Ugliness Ahead for the Russell 2000? Click to view

    July 18th, 2014 Chris Kimble

    The Russell 2000 is up against a 14-year resistance line and might have put in a double top.

    After creating what could be a double top, the following week the Russell created a "weekly engulfing bearish pattern", wiping out a month's worth of gains in the small cap index in a single week!

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    Conference Board Leading Economic Index: Fifth Monthly Increase Click to view

    July 18th, 2014 Doug Short

    The Latest Conference Board Leading Economic Index (LEI) for June is now available. The index rose 0.3 percent to 102.2 percent. May was revised upward from 101.4 to 1.07 percent (2004 = 100). The latest number came in slightly below the 0.5 percent forecast by Investing.com. This was the fifth consecutive month of increase.

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    Profits - Plus a "Mystery Booster" - Are Driving the Stock Market Higher Click to view

    July 17th, 2014 Adam Feik

    As amazing as it seems, over 5 years have now passed since the market hit “bottom” at the end of the 2008 “Great Recession.” Since then, the stock market has delivered phenomenal performance – especially in the last few years.

    But has the stock market “disconnected” from the realities in the underlying economy? Are companies really making enough profits to merit the 224.4% stock market rally we’ve had from the March 9, 2009, low point, through June 30, 2014 (including dividend re-investment)?

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    Philly Fed Business Outlook: Fifth Month of Growth Click to view

    July 17th, 2014 Doug Short

    The Philly Fed's Business Outlook Survey is a monthly report for the Third Federal Reserve District, covers eastern Pennsylvania, southern New Jersey, and Delaware. The latest gauge of General Activity came in at 23.9, an increase from last month's 17.8. The 3-month moving average came in at 19.0, up from 16.6 last month. Since this is a diffusion index, negative readings indicate contraction, positive ones indicate expansion. Today's six-month outlook at 58.1 is the highest last October.

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    Europe Walks a Fine Line ... Watch Your Next Step! Click to view

    July 17th, 2014 Chris Kimble

    The strong rallies in London, Germany and France over the past few years has created steep bearish rising wedges, which two-thirds of the time result in lower prices.

    No doubt the trend is up on all three of these key markets!

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    How Long to the Next Recession? iM’s Weekly Update Click to view

    July 17th, 2014 Anton Vrba and Georg Vrba

    The BCI at 178.5 is up from last week’s 177.5. The BCIg, the smoothed annualized growth of BCI, at 21.6 is at its highest level in the current business cycle, rising from last week's 20.3. This week’s BCI does not indicate a possible recession in the near future.

    Figure 1 plots BCIp, BCI, BCIg and the S&P500 together with the thresholds (red lines) that need to be crossed to be able to call a recession.

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    Why Good Is the New Bad and Why You Should Buckle Up This Fall Click to view

    July 16th, 2014 Chris Puplava

    As strangely as it may seem, there are times when good economic data is bullish and other times when good economic data may be bearish. The same is true for bad economic data, which can elicit both good and negative market reactions. Typically, the deciding factor for how such incoming data will be interpreted is in how it will drive changes in monetary policy.

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    Dow Technical Update: Near the Final High? Click to view

    July 16th, 2014 John Bougearel

    The rally off the July 10 low is unfolding in 5 waves similar to the 5 wave rally that unfolded off the June 25 low (see 50-min chart). The behavioral models on the 50-min chart say this 5th wave will finish on Thursday or Friday between 17,144-17,188.

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    Is Yellen Being Misled By Employment Statistics? Click to view

    July 16th, 2014 Lance Roberts

    Yesterday, Chairwoman Janet Yellen presented the Federal Reserve's Semiannual Monetary Policy Report to the Congressional Committee on Banking, Housing, and Urban Affairs. While the financial markets were closely focused on clues as to the future direction of monetary policy and rate hikes (see "Analyzing Impact Of Fed Rate Hikes), I wanted to address her comments regarding the current employment situation and outlook.

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    Producer Price Index Rises Above Expectations Click to view

    July 16th, 2014 Doug Short

    oday's release of the June Producer Price Index (PPI) for Final Demand rose 0.4% month-over-month seasonally adjusted. Core Final Demand was up 0.2% from last month. The headline number was well above the Investing.com expectation, which was for a 0.2% increase for both numbers.

    The unadjusted year-over-year change in Final Demand is up 1.9%, little changed from last month's YoY of 2.0%.

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    Disturbing Charts (Update 15) Click to view

    July 16th, 2014 Ted Kavadas

    I find the following charts to be disturbing. These charts would be disturbing at any point in the economic cycle; that they (on average) depict such a tenuous situation now – 61 months after the official (as per the September 20, 2010 NBER BCDC announcement) June 2009 end of the recession – is especially notable.

    These charts raise a lot of questions. As well, they highlight the “atypical” nature of our economic situation from a long-term historical perspective.

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    Census Bureau Revisions to Retail Sales Click to view

    July 15th, 2014 Doug Short

    Earlier today I posted my monthly update on Retail Sales. Those of us who routinely track this series know that the Advance Estimate will be followed by a second estimate next month and a third estimate the month after. How big are those revisions? Are they big enough to warrant skepticism about the Advance Estimate?

    See for yourself. Here is a visualization of the cumulative change from the first to third estimates from January 2007 through April 2014, the most recent month for which we have three data points.

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    Forecasting the Market: A Thought Experiment Revisited Click to view

    July 15th, 2014 Chris Turner

    As Q2-14 earnings begin, here is the latest update of my ongoing "thought experiment" for forecasting the S&P 500 price based on earnings fundamentals.

    The chart below is based on the latest trailing twelve-month earnings (TTM) data published on the Standard & Poor's website as of July 14th, 2014. The numbers are from the spreadsheet maintained by senior analyst Howard Silverblatt. See dshort's monthly valuation update for instructions on downloading the spreadsheet.

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    Analyzing The Impact Of Fed Rate Hikes On Markets & Economy Click to view

    July 15th, 2014 Lance Roberts

    There has been much discussion as of late about the end of the current quantitative easing program and the beginning of the Federal Reserve "normalizing" interest rates. The primary assumption is that as interest rates normalize, the financial markets will continue to rise as economic growth strengthens. While this certainly seems like a logical assumption, is it really the case?

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    Ready for a Crude Awakening? Click to view

    July 15th, 2014 Chris Kimble

    Even though the media tells us of unrest in the mid-east, Crude Oil is breaking support of a bearish rising wedge. On June 20th, Crude oil hit a short-term high on news coming out of Iraq, and since then Crude Oil is down almost 10%.

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    June Retail Sales Disappoint, Weak Autos Sales to Blame Click to view

    July 15th, 2014 Doug Short

    The Advance Retail Sales Report released this morning shows that sales in June rose 0.2% month-over-month, down from 0.5% in May, which was an upward revision from 0.3%. Core Retail Sales (ex Autos) rose 0.4% in June, the same as May, which was an upward revision from 0.1%. The major culprit in today's disappointing numbers was the -0.3% for the Motor Vehicle & Parts Dealers category, with new vehicle sales posting a -0.24%.

    Today's headline and core numbers were below the Investing.com forecasts, which were 0.6% for Headline and 0.5% for Core.

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    Empire State Manufacturing Continues to Show Strength Click to view

    July 15th, 2014 Doug Short

    This morning we got the latest Empire State Manufacturing Survey. The diffusion index for General Business Conditions continues to show strength, now at 25.6, up from 19.3 last month and at a multi-year high. The Investing.com forecast was for a reading of 17.0. The Empire State Manufacturing Index rates the relative level of general business conditions New York state. A level above 0.0 indicates improving conditions, below indicates worsening conditions. The reading is compiled from a survey of about 200 manufacturers in New York state.

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    Valuation Based Equity Market Forecasts: Q2 2014 Click to view

    July 14th, 2014 Adam Butler, Mike Philbrick and Rodrigo Gordillo

    Any analysis that relies on the past to offer guidance about the future makes the strong assumption that the future will in fact resemble the past. We have no guarantee that this will be the case. Many optimistic analysts assert that the invention of central banking, global communications and trade, robotics, 3D printing, Paul Krugman, or any number of ‘game changers’ that have evolved over the past few decades renders comparisons with our past misguided. Surely we won’t make the mistakes of our ancestors....

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    Happiness Revisited: A Household Income of $75K? Click to view

    July 14th, 2014 Doug Short

    A current APViewpoint discussion on "The Sad State of Happiness" included an indirect reference to a popular 2010 academic study by psychologist Daniel Kahneman and economist Angus Deaton. Their topic was the correlation between annual household income and day-to-day contentment. They analyzed more than 450,000 total responses to a Gallup weekly survey of households across the 50 states and DC. The survey was conducted in 2009.

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    Investors Forgot Everything That Happened Just a Few Years Ago? Click to view

    July 14th, 2014 Michael Lombardi

    There are two important charts I want my readers to see this morning.

    The first is a chart that is an indirect measure of demand in the global economy. Right now, the Baltic Dry Index (BDI) sits at its lowest level of the year. Since the beginning of 2014, the BDI has fallen 60%.

    The BDI measures the cost of moving major raw materials by sea in the global economy. The thinking is that the lower the cost to move goods by ship, the lesser the amount of goods to move (a strict demand/supply price situation).

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    Gauging Investor Sentiment with Twitter: Weekly Update Click to view

    July 13th, 2014 Blair Jensen

    The Downside Hedge sentiment indicators for the S&P 500 Index (SPX) from both Twitter and StockTwits issued consolidation warnings on Friday. The rally from 1900 to 1985 on SPX has been met with skepticism from traders on StockTwits and Twitter. As the rally progressed smoothed sentiment steadily decreased creating a negative divergence from price lasting two months. At the close on Friday smoothed sentiment broke sharply below a confirming uptrend line that had been in place for over three months. The break of the uptrend line after a negative divergence creates the warning.

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    Eye on the Market Broadcast: A Deeper Look into the Labor Force Click to view

    July 12th, 2014 Doug Short

    I've again had the honor of being a guest on David O. England's "Eye on the Market" radio broadcast. My first segment last month focused on household incomes. A second segment explored some of the complexities of the Bureau of Labor Statistics' Consumer Price Index.

    The latest segment, which aired today, touches on some rather dramatic changes in the labor force participation rate by age groups. This is an area of interest I examine monthly in a series of updates following the BLS's release of the latest employment report.

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    5 Things To Ponder: The Everything Boom Click to view

    July 11th, 2014 Lance Roberts

    Earlier this week I posted an article discussing signs of "market exuberance" which including a link to a Neil Irwin, NYT, article entitled "Welcome To The Everything Boom." The article is well worth reading, but Neil asks the right questions.

    "'We’re in a world where there are very few unambiguously cheap assets,' said Russ Koesterich, chief investment strategist at BlackRock. 'If you ask me to give you the one big bargain out there, I’m not sure there is one.'....

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    Does the Fed Really Believe What it Says? What About Krugman? Click to view

    July 11th, 2014 Mike Shedlock

    In response to BIS Slams the Fed; Ridiculous Question of the Day: "Is The Fed Going To Attempt A Controlled Collapse?" a number of people commented the Fed cannot be so stupid as to think there is no asset bubble. Here are some examples:

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    UK and France: 2000 & 2007 Redux? Click to view

    July 11th, 2014 Chris Kimble

    The UK (FTSE 100) and France (CAC 40) broke steep support lines back in 2000-2001 and 2007 and proceeded to fall hard. The FTSE is back at the 2000 & 2007 levels at this time and the CAC 40 is weaker, creating (so far) lower highs in 2007 and now than back in 2000.

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    On a Personal Note: "It is Wealth to be Content" Click to view

    July 10th, 2014 Doug Short

    Last month the Advisor Perspectives newsletter featured an interesting article by best-selling author Dan Solin on "The Sad State of Happiness". Dan opened the article with some compelling observations:

    "I have never met anyone who did not want to be happy. Yet few of us take concrete steps toward that goal. Part of the problem is that too many of us confuse happiness with increased wealth."

    His article prompted a series of comments in APViewPoint. I was particularly struck by a comment from financial guru Larry Swedroe:

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    Demographic Trends in the 50-and-Older Work Force Click to view

    July 10th, 2014 Doug Short

    Note from dshort: I’ve updated this commentary with the latest numbers from last week’s Employment Report.

    This is not the scenario that would have been envisioned a generation ago for the "Golden Years" of retirement. Consider: Today nearly one in three of the 65-69 cohort and almost one in five of the 70-74 cohort are in the labor force.

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    Current Low Levels of Financial Risk and Future Implications Click to view

    July 10th, 2014 Ted Kavadas

    Recently many indicators that are supposed to depict the level of risk in the financial markets and economy have been at or near all-time lows....

    Among the critical questions these purported (ultra) low risk levels beg is whether there is indeed very low levels of underlying risk in the financial system and economy; and if such low levels of risk leave the system susceptible to upheaval once risk, as measured by these indicators, rebounds.

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    European Banks Break Support! Ripple Effect in Markets? Click to view

    July 10th, 2014 Chris Kimble

    Are European banks in trouble? If so, could weakness in the European financial sector spill over into stock markets around the world?

    European Financial ETF EUFN has formed a bearish rising wedge over the past few months and a few days ago broke below support in the chart above.

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    How Long to the Next Recession? iM’s Weekly Update Click to view

    July 10th, 2014 Anton Vrba and Georg Vrba

    The BCI at 177.5 is up from last week’s upward revised 176.6. The BCIg, the smoothed annualized growth of BCI, at 20.3 is also up from last week's 19.2. This week’s BCI does not indicate a possible recession in the near future.

    Figure 1 plots BCIp, BCI, BCIg and the S&P500 together with the thresholds (red lines) that need to be crossed to be able to call a recession.

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    Not Seeing Signs Of Market Exuberance? Look Closer Click to view

    July 9th, 2014 Lance Roberts

    Geopolitical unrest in Iraq/Ukraine? Buy stocks.
    Unemployment drops to 6.1%? Buy stocks.
    Loss of 500,000 full-time jobs? Buy stocks.
    GDP falls by much more than expected? Buy stocks.
    Q2 economic rebound much weaker than originally estimated? Buy stocks.
    Rising/falling oil prices? Buy stocks.

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    Central Banks Moving "Herd-Like" Into Stock Market Click to view

    July 9th, 2014 Cris Sheridan

    Over the last several years, two powerful forces have helped to drive the stock market far higher than many may have anticipated. The first, as we all know, has been very loose monetary policy through a combination of low rates and continuous rounds of QE by the Federal Reserve.

    The second has been the record amount of stocks bought by companies through share buybacks—close to half a trillion dollars last year with another $160 billion in the first quarter of this year.

    It appears we may now have to add a third item to the list.

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    Last Time This Happened, The Markets Dropped 18% Click to view

    July 9th, 2014 Adam Feik

    A major financial event looks likely to happen in the next 3-6 months. As investors, we need to be aware of what’s coming, so today let’s take a look ahead. Here we go:

    By the end of 2014, most observers expect the Federal Reserve (the “Fed”) to end the 3rd round of its “large-scale asset purchases,” a.k.a., “Quantitative Easing,” or “QE.” So we’d all be wise to consider this:

    How will markets react when the Fed’s “QE” program ends?

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    Structural Trends in Employment by Age Group Click to view

    July 9th, 2014 Doug Short

    Note from dshort: I’ve updated this commentary with the latest numbers from last week’s Employment Report.

    The Labor Force Participation Rate (LFPR) is a simple computation: You take the Civilian Labor Force (people age 16 and over employed or seeking employment) and divide it by the Civilian Noninstitutional Population (those 16 and over not in the military and or committed to an institution). The result is the participation rate expressed as a percent.

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    Multiple Jobholders as a Percent of the Employed: Two Decades of Trends Click to view

    July 9th, 2014 Doug Short

    What are the long-term trends for the percentage of multiple jobholders in the US? The Bureau of Labor Statistics has two decades of historical data to enlighten us on that topic, courtesy of Table A-16 monthly Current Population Survey.

    As of the latest monthly data, multiple jobholders account for less than 5% of civilian employment. The survey captures data for four subcategories, the current relative sizes of which I've captured in a pie chart below. Note that the distinction between "primary" and "secondary" jobs is subjective one.

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    Secular Bull and Bear Markets Click to view

    July 8th, 2014 Doug Short

    Note from dshort: With the early release of the June employment report I forgot to post this routine monthly update. Thanks to Ron's friendly reminder, here it is!

    Was the March 2009 low the end of a secular bear market and the beginning of a secular bull? Without crystal ball, we simply don’t know. One thing we can do is examine the past to broaden our understanding of the range of possibilities. An obvious feature of this inflation-adjusted is the pattern of long-term alternations between up-and down-trends.

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    Happy Days Are Here Again ... Or Are They? Click to view

    July 8th, 2014 Chris Kimble

    Happy times are here again and the financial crisis seems like a distant memory, at least judging by record highs on the U.S. stock indexes.

    But is everything really hunky-dory? I might be crazy, but some interesting patterns I’ve noticed in consumer confidence and the velocity of money suggest perhaps not.

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    The Market In Pictures - Mid-Year Update Click to view

    July 8th, 2014 Lance Roberts

    In November of 2013, I did a chart analysis of the markets at the time. Now that we have passed the halfway point in 2014 I thought it would be a timely retrospective to revisit that post and update those charts accordingly.

    There is currently a debate being waged on Wall Street. On one side of the argument are individuals who believe that we have entered into the next "secular bull market" and that the markets have only just begun what is an expected multi-year advance from current levels.

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    The Part-Time Employment Ratio: A Curious Anomaly in June Click to view

    July 8th, 2014 Doug Short

    ...The summer narrowing of the spread in the less volatile 25-54 cohort has consistently begun in June. However, this year's June data shows a widening spread, as we can see from the highlighted summer months in the chart above. The last time that happened was in the summer of 2008. Note also that the May MoM increase in the 35+ hours was substantially greater than the May increases during the three previous years. Perhaps this year's May Full-Time surge, for whatever reason, could be responsible for the June reversal.

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    Small Business Sentiment: Recent Optimism Not Sustained Click to view

    July 8th, 2014 Doug Short

    The latest issue of the NFIB Small Business Economic Trends is out today. The July update for June came in at 95.0, down 1.6 points from the previous month's 96.6. Today's headline number marks a reversal after three months of improvement. The index is now at the 26.0 percentile in this series, a level it first achieved in October 2007, two months before the last recession.

    The Investing.com forecast was for 97.3.

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    Real Earnings of Private Employees Declined Again in May Click to view

    July 8th, 2014 Doug Short

    Here is a look at two key numbers in last week's monthly employment report for June:

    • Average Hourly Earnings
    • Average Weekly Hours
    The government has been tracking the data for Production and Nonsupervisory Employees for decades. But coverage of Total Private Employees only dates from March 2006.

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    Market Cap to GDP: The Buffett Valuation Indicator Click to view

    July 7th, 2014 Doug Short

    Market Cap to GDP is a long-term valuation indicator that has become popular in recent years, thanks to Warren Buffett. Back in 2001 he remarked in a Fortune Magazine interview that "it is probably the best single measure of where valuations stand at any given moment."

    The four valuation indicators I track in my monthly valuation overview offer a long-term perspective of well over a century. The raw data for the "Buffett indicator" only goes back as far as the middle of the 20th century.

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    Word to the Wise: Keep an Eye on Crude Click to view

    July 7th, 2014 Chris Kimble

    Unrest in Iraq pushed Crude Oil prices up for a week and bullish sentiment towards crude reached lofty levels. Turmoil continued in Iraq, yet Crude Oil turned soft.

    The decline in crude oil has it now testing a 6-month support line and support is support until broken. Should support give way, Crude might turn soft for a while due to sentiment is still at lofty levels.

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    This Is Odd... Click to view

    July 7th, 2014 Michael Lombardi

    One of the oddest things to happen with the stock market since it has recovered is that the number of shares trading hands each day has slowly disappeared.

    In the table that I have created for you below, I list the trading volume for the S&P 500 for each June since 2009 and the percentage change in volume from the previous June.

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    New Updates at Crestmont Research Click to view

    July 7th, 2014 Ed Easterling

    Note from dshort: My friend Ed Easterling, whose Crestmont Research P/E valuation is a regular feature on this website, has published collection of periodic updates to his ongoing analysis. The commentary below is reprinted from his latest distribution email to subscribers.

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    Estimating Stock Market Returns to 2020 and Beyond: Update Click to view

    July 7th, 2014 Georg Vrba

    About two years ago I offered evidence that a major bull market may have commenced in 2009. Additionally, a statistical analysis of the historic data of the S&P Composite presented in an Aug-2012 article and Jan-2014 update thereto supported this finding. Since August 2012 the S&P500 has now gained a real 40% to the end of June 2014. So what further gains can we expect, if any?

    Will the bull market continue?

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    The S&P 500, Dow and Nasdaq Since Their 2000 Highs Click to view

    July 6th, 2014 Doug Short

    Here is a update in response to a standing request from David England, a retired professor now actively educating investors through his Trader’s Eye website. In his presentations, he likes to disprove the standard message of Wall Street, "Don’t worry! The market will always come back." I furnished David with some charts, and I now share them with regular visitors to my Advisor Perspectives pages.

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    Weighing the Week Ahead: Time for a Mid-Course Correction? Click to view

    July 6th, 2014 Jeff Miller

    After an event-filled 3 ½ day trading week, it is time to pause and reconsider. There is little fresh news in store this week, and therefore plenty of time for calendar-driven introspection.

    Is it time for a mid-course correction?

    I expect the punditry to assemble the evidence, with each concluding that (s)he has been right all along

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    Housing 2014 Mid-Year Update: The Rich Have Their Cake and Eat It Too Click to view

    July 5th, 2014 Logan Mohtashami

    As the housing selling season winds down with the end of spring and the beginning of the summer months, it is a good time to get an informed perspective of housing demand for the year. This can be gleaned from three major metrics; mortgage purchase applications, existing home sales and new home sales, year over year (YoY).

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    5 Things To Ponder: Thoughts From The Beach Click to view

    July 4th, 2014 Lance Roberts

    Alas, all good things must come to an end. As the kids summer vacation trip comes sadly to an end, it is only fitting that the final edition of "Thoughts From The Beach (TFTB)" would be this weekend's "5 Things To Ponder."

    This week was very busy with economic data. For the most part, the majority of the data came basically inline with expectations. However, the internals of the various reports were much less encouraging. The most noteworthy report, and the least important from an investment standpoint, was the monthly employment report....

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    Weekly Market Summary Click to view

    July 4th, 2014 Urban Carmel

    There are things to be concerned about and things to not be concerned about.

    With an improvement in macro data in the past quarter, there is a concern that high interest rates are both imminent and a threat to equities. This should not be a concern.

    More…

    Digging Deeper Into the June Employment Report Click to view

    July 3rd, 2014 Mike Shedlock

    Initial Reaction

    On the surface, this appeared to be a very strong jobs report from both the household survey and establishment survey perspective.

    The establishment survey reported a gain of 288,000 jobs while the household survey sported a gain in employment of 407,000. In addition, May was revised up from +217,000 to + 224,000, and April revised up from +282,000 to +304,000.

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    Houston We Could Have a Problem in Government Bonds Click to view

    July 3rd, 2014 Chris Kimble

    Downside action in bonds today have to do with the employment report? Nah, or not much at least.

    The power of the pattern would suggest bonds have a bigger issue on their hands than the report today. Five weeks ago TLT created a bearish wick at falling resistance and now this week it looks to be creating an engulfing bearish pattern.

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    Yellen at IMF: Fed Not in the Bubble Popping Business Click to view

    July 3rd, 2014 Cris Sheridan

    If you think stocks are in a bubble and the Fed should start raising rates, well, the last two speeches from Fed Chair Yellen certainly paint a different view.

    Speaking on June 18th at the most recent FOMC press conference, Yellen first made it clear that rates would be kept near zero for a “considerable time”.

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    How Long to the Next Recession? iM’s Weekly Update Click to view

    July 3rd, 2014 Anton Vrba and Georg Vrba

    The BCI at 176.5 is up from last week’s 175.3. The BCIg, the smoothed annualized growth of BCI, at 19.2 is also up from last week's 18.2. This week’s BCI does not indicate a possible recession in the near future.

    Figure 1 plots BCIp, BCI, BCIg and the S&P500 together with the thresholds (red lines) that need to be crossed to be able to call a recession.

    More…

    ISM Non-Manufacturing: June Composite Falls Slightly Click to view

    July 3rd, 2014 Doug Short

    Today the Institute for Supply Management published its latest Non-Manufacturing Report. The headline NMI Composite Index is at 56.0 percent, down slightly from last month's 56.3 percent. Today's number came in below the Investing.com forecast of 56.3.

    Here is the report summary:

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    The Civilian Labor Force, Unemployment Claims and Recession Risk Click to view

    July 3rd, 2014 Doug Short

    Note from dshort: I’ve updated this commentary to include the latest labor force data in today’s employment report.

    A long-term chart of the seasonally-adjusted 4-week moving average of Initial Claims gives a rather distorted view of the economy. Why? Because it doesn’t take into account the 103% growth in the Civilian Labor Force since January 1967. For a better understanding of the weekly Initial Claims data, let’s view the numbers as a percent ratio of the Civilian Labor Force.

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    Recession Probability Models - July 2014 Click to view

    July 3rd, 2014 Ted Kavadas

    There are a variety of economic models that are supposed to predict the probabilities of recession.

    While I don’t agree with the methodologies employed or probabilities of impending economic weakness as depicted by the following two models, I think the results of these models should be monitored.

    Please note that each of these models is updated regularly, and the results of these – as well as other recession models – can fluctuate significantly.

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    Market Valuation, Inflation and Treasury Yields: Clues from the Past Click to view

    July 2nd, 2014 Doug Short

    My monthly market valuation updates have long had the same conclusion: US stock indexes are significantly overvalued, which suggests cautious expectations on investment returns. In a "normal" market environment -- one with normal business cycles, Federal Reserve policy, interest rates and inflation -- current valuation levels would be a serious concern.

    But these are different times.

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    Market Valuation Overview: Yet More Expensive Click to view

    July 2nd, 2014 Doug Short

    Here is a summary of the four market valuation indicators I updated each month.

    • The Crestmont Research P/E Ratio
    • The cyclical P/E ratio using the trailing 10-year earnings as the divisor
    • The Q Ratio, which is the total price of the market divided by its replacement cost
    • The relationship of the S&P Composite price to a regression trendline

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    The Q Ratio and Market Valuation: Monthly Update Click to view

    July 1st, 2014 Doug Short

    Quick take: Based on data extrapolations through the end of June, the Q Ratio is 70% above its arithmetic mean and 83% above its geometric mean. If we use the calculation method of Nobel Laureate James Tobin, the ratio is 87% above its arithmetic mean and 105% above its geometric mean.

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    Crestmont Market Valuation Update Click to view

    July 1st, 2014 Doug Short

    Quick take: Based on the June S&P 500 average of daily closes, the Crestmont P/E is now 90% above its arithmetic mean and at the 98th percentile of this fourteen-decade monthly metric.

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    Is the Stock Market Cheap? Click to view

    July 1st, 2014 Doug Short

    Here is a new update of a popular market valuation method using the most recent Standard & Poor's "as reported" earnings and earnings estimates and the index monthly averages of daily closes for the past month, which is 1,947.09. The ratios in parentheses use the monthly close of 1,960.23. For the earnings, see the table below created from Standard & Poor's latest earnings spreadsheet.

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