Thoughts

1. Investors Intelligence Bulls has reached 60%. Not medium term bearish for stocks.
2. Banks’ lending standards are easing even more. Medium-long term bullish for the stock market.
3. Heavy Truck Sales are making new highs. Medium-long term bullish for the stock market.
4. Unit profits are down: this equities bull market doesn’t have a lot of years left.
5. Philadelphia Fed’s Leading Index is falling: this equities bull market doesn’t have a lot of years left.
6. Why most hedge funds & professional traders have consistently underperformed from 2009-present.

1 am: Investors Intelligence Bulls has reached 60%. Not medium term bearish.

The Investors Intelligence ratio has reached 60% for the first time since January 2018. This has caused some traders to turn bearish on the stock market for the medium term.

*The Investors Intelligence Bullish Percentage is used as a contrarian indicator. The more bulls there are, the more bearish this is deemed to be.

However, a more detailed look at the Investors Intelligence Bullish Percentage demonstrates that there’s nothing bearish about the bullish percentage exceeded 60%. Investors Intelligence Bullish Percentage spends a lot of time at 60%.

(Click on image to enlarge)

1 am: Banks’ lending standards are easing even more. Medium-long term bullish for the stock market.

Banks’ lending standards continue to ease (trend downwards).

(Click on image to enlarge)

Easing lending standards is a medium-long term bullish sign for the stock market and economy. It gives this aged economic expansion and bull market a little more juice via easier loans and more credit.

As you can see, lending standards tend to get tighter in the last rally of a bull market.

(Click on image to enlarge)

1 am: Heavy Truck Sales are making new highs. Medium-long term bullish for the stock market.

The latest reading for Heavy Truck Sales went up from 485k to 494k. But more importantly, Heavy Truck Sales are still trending higher.

(Click on image to enlarge)

This is a medium-long term bullish sign for the stock market. Historically, Heavy Truck Sales trended downwards before bear markets and economic recessions began (see study)

(Click on image to enlarge)

1 am: Unit profits are down: this equities bull market doesn’t have a lot of years left.

Corporate unit profits have been down since the end of 2014.

This IS NOT a timing indicator for predicting the end of bull markets. Sometimes unit profits will fall a year or two before recessions and bear markets begin. Sometimes unit profits will fall for half a decade before unit profits begin. But this does tell us that 2014/2015 marked the halfway point for this economic expansion and bull market.

(Click on image to enlarge)

This indicator suggests that this equities bull market doesn’t have many years left. By the Medium-Long Term Model‘s estimates, mid-2019 is the most likely top.

1 am: Philadelphia Fed’s Leading Index is falling: this equities bull market doesn’t have a lot of years left.

The Philadelphia Fed’s Leading Index is falling right now. More importantly, this Leading Index is trending lower.

(Click on image to enlarge)

Historically, this means that we are closer to the end of the economic expansion & bull market.

1 am: Why most hedge funds & professional traders have consistently underperformed from 2009-present.

Hedge funds were very aggressive before the GFC and extremely defensive after the GFC.

This is why most hedge funds & professional traders continue to underperform from 2009-present.

They've been scarred by the GFC. Focus on "risk" is important, but too much emphasis on risk kills returns.

Focus on the EXPECTED PROBABILITY of risk, not the MAGNITUDE of risk pic.twitter.com/hH9mTPLD4r

— Troy Bombardia (@bullmarketsco) September 5, 2018

Outlook

Here’s what I think will happen based on my discretionary outlook.

1. 2018 will trend higher but will also be a choppy year.
2. The S&P 500 has approximately 1 year left in this bull market (bull market top sometime in 2019).