Market Report: Smart Money Is Selling At The Fastest Pace Since 2007

Here, we can see that the adjusted Fear/Greed is high, but this wasn’t bearish in the past. When emerging markets’ momentum was this strong, they usually rallied further over the next 3 months:

This is a bullish reading for emerging markets.

Breadth

Breadth is very strong across the world. The % of Nasdaq stocks at a 52 week high continues to increase:

Such strong breadth readings were bullish for the Nasdaq over the next 9-12 months:

While it’s important to focus on the trend, it’s also important to beware of mounting risks:

Speculative signs

Everything small and risky is soaring right now. An index of the most shorted, most leveraged stocks saw its 14 week RSI explode higher. The last 2 times this happened led to sharp corrections in these risky stocks:

It’s easy to see why investors are plowing into risk. Central banks are flooding the market with an ocean of liquidity:

The everything rally

As I noted on Tuesday, stocks are rallying around the world. The average country’s stock index is 18% above its 200 dma! This is the highest reading in over a decade:

*I calculated this average using the following countries’ indices: U.S., Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, HK, Ireland, Israel, Italy, Japan, Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, UK, Brazil, China, India, South Korea, Mexico, Taiwan, Russia.

When so many stock markets around the world surged in the past, the S&P 500 (which accounts for half of global market cap) usually rallied a little more over the next 3 months, followed by a sharp pullback 6 months later.

High volatility is to be expected in the coming months. The overextended rally can overextend even further, but nothing lasts forever.

Looking more closely within the U.S., micro-cap stocks (the smallest of stocks) are now more than 40% above their 200 day moving average! The last time this happened was in February – March 2000, near the peak of the dot-com bubble.

View single page >> |
How did you like this article? Let us know so we can better customize your reading experience.

Comments

Leave a comment to automatically be entered into our contest to win a free Echo Show.