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Technical Market Indicators
Dow Theory, W.D. Gann, MetaStock, system tester, indicator builder, custom formulas, momentum, overbought, oversold, buy, sell, signals, top, bottom, Bull, Bear, consolidation, sentiment, contrary opinion
May 10, 2021
Stock Market Outlook: "The markets appear to be poised for interesting times."
Preview from my weekly report*
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"Vulnerabilities associated with elevated risk appetite are rising. Valuations across a range of asset classes have continued to rise from levels that were already elevated late last year.... With investors ebullient on expectations for a strong rebound, it is important to closely monitor risks to the system and ensure the financial system is resilient...." -- the Federal Reserve's latest Financial Stability Report
Is the Fed finally starting to realize that excessively stimulative fiscal and monetary policies are the cause of excessive risk appetites and price overvaluations? Does the Fed realize that it will be forced to revert to more normal monetary policies, sooner rather than later, in order to let some air out of the overheated bubble that the Fed itself is blowing?
Goldman Sachs research reports that rising prices and the implications of rising input costs for profit margins was among the primary topics of discussion in many of the just concluded corporate Q1 earnings calls. Asset manager Jeffrey Gundlach of DoubleLine has the nerve to ask how, exactly, can the Fed be confident that higher inflation will be "transitory" and that the Fed has "the tools" to manage it. "How do they know that? There's plenty of money-printing ... commodity prices going up massively... home prices in the US are inflating very substantially... so there's a lot of inflation that's already baked into input prices... It's not clear to me that inflation is going to go back down to around 2 to 2.5%... We don't know, nobody knows... but we're most concerned with the fact that the Fed thinks they know....There are plenty of indicators that suggest inflation is going to go higher and not just on a transitory basis. This is worrisome because the Fed's track record is anything but inspiring. The Fed could not prevent the global financial crisis of 2008, when we almost had a complete meltdown of the financial system."
The markets appear to be poised for interesting times. Probable Potential Reward appears less than Probable Potential Risk for the stock market, based on fundamental stock-price overvaluations and overbought greedy investor sentiment. Stock prices have run far ahead of quantifiable reality. Stocks are overbought and overvalued relative to traditional measures: sales, earnings, dividend yields, and book value. Stocks are priced for an extremely optimistic future, ignoring all potential bumps in the inherently unpredictable road ahead. History shows that overly high stock prices are followed by low returns, and overpaying for stocks is not profitable.
Our full report reviews indicators that we monitor every day and offers clear and unbiased guidance on the following each week:
Global stock markets
The Defensive stock sectors
The Health Care sector
The Cyclical sectors
The Technology sector
The Financials sector
U.S. bonds and notes
Commodities (Oil, Metals, Agriculture)
Objective Quantitative Rankings for hundreds of Exchange Traded Funds
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My ETF Rankings are not investment advice. Rather, they are an objective ongoing research study.
Analysis of market forces may offer a sense of probabilities. But the many variables that can impact market prices are notoriously difficult to predict. And, market analysis is something less than an exact science. So, sound trading tactics are always recommended. See my Money Management Rules.
According to CFTC Rule 4.41, hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under- or over-compensated for the impact, if any, of certain market factors, such as lack of liquidity. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown.
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