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Stock Market Indicators – January 17th, 2016

17 January 2016

Here are the latest readings from my stock market indicators.  In hindsight, it was quite clear that a top was forming around May as the Dow made new highs and my long term indicator failed in trying to make new highs.

Long term:

lt_1-17-2016

The long term indicator is slightly oversold compared to its performance the last four years.  We’ll have to monitor to see if it makes a new cycle low relative to the values reached in early October prior to that “best October ever” started.

Medium term:

mt_1-17-2016

The medium term stock market indicator is headed towards lows set in 2011 and in the summer of 2015.  Similar to my long term indicator declining while the Dow went up last spring / summer, the medium term indicator also deteriorated showing weakness behind the scenes.

Short term:

st_1-17-2016

The short term indicator bounced briefly last week from 13% to 17% on Thursday’s rally.  It stayed at 17% on Friday despite the weakness on Friday.

Fundamentally, the negatives are as follows:  monetary base shrinking, manufacturing PMI in recessionary territory, ECRI WLI growth negative, flattening yield curve, and low oil prices are hurting oil producers that used loans to expand business the last seven years.  The cheap credit available caused malinvestment and over-extension.

Fundamentally, the positives are as follows:  services PMI still not in recession territory, yield curve still not inverted, and the conference board LEI is not negative.

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