Bubble Bursting: The Market Is On The Cusp Of A Big Crash
Wall Streeters Are Starting To Pass Around This Chart Showing The Market On The Cusp Of A Big Crash
Dan Greenhaus of BTIG (@danBTIG) includes this chart in his latest nightly email. It shows the current market aligned with the market in the days before the Depression.
What does the chart mean?
Dan has the best take:
What Happened The Last Time The Market Was This Far Ahead Of Strategists’ Expectations?
With less than 6 weeks left to the end of the year, the S&P 500 has reached its “richest” nominal price relative to the average Wall Street strategist’s forecast. The last time the ‘market’ over-reached like this was in mid-May, right before the exuberance of a non-taper-believing investor-class was popped (oh so briefly).
Is a Stocks Bear Market Right Around the Corner?
What the 2007 Top Can Tell Us about the Present
The most famous law of economics that everyone learns in Econ 101 is the law of supply and demand. Essentially, if there are more buyers than sellers then prices will go up until equilibrium is reached. Conversely, if there are more sellers than buyers prices will decline. The stock market is no different.
If there are more buyers of stocks than sellers, the stock market will rise and will continue to do so until either the ranks of willing buyers thins out and/or the ranks of sellers grows. When equilibrium is reached between buyers and sellers a market begins to stall. When you have a continued stream of sellers dumping their holdings, a bear market ensues.
Goldman Sachs’ Outlook For Stocks Looks A Lot Like Jeremy Grantham’s Bubble Scenario
David Kostin, Goldman Sachs’ top equity strategist, just published his 2014 outlook for stocks. His report also included his lofty prediction for the S&P 500 through 2016.
Specifically, Kostin sees the S&P 500 rising 6% to 1,900 by the end of 2014, 17% to 2,100 by the end of 2015, and 23% to 2,200 by the end of 2016.
“Our  return forecast reflects rising, albeit decelerating, profit growth and a slightly lower P/E multiple,” said Kostin. “The linchpin of our market forecast is growth – in the economy, sales, and earnings. We expect 3.6% global economic growth. The US will advance at a 3% pace while inflation remains contained at 1.4%. China, Japan, and even Europe will all grow, expanding GDP by 7.8%, 1.6%, and 1.5%, respectively. Sales and earnings growth are a direct result of economic activity. We expect revenue growth of 5% (ex-Financials and Utilities) and overall EPS growth of 8% in 2014. Growth in these metrics should continue in 2015, 2016, and 2017.”
Interestingly, this bullish forecast fits surprisingly well with the long-term bearish forecast of GMO’s Jeremy Grantham.
Read more: http://www.businessinsider.com/goldman-sachs-2014-sp-500-outlook-2013-11#ixzz2lNn3awUN
China’s Growth Acceleration Is Reaching Its End
In recent months, China has quashed fears that the economy was slowing and heading for a hard landing.
However, China’s November HSBC manufacturing flash PMI reminds us that the country’s growth outlook remains uncertain.
The headline PMI fell to a two-month low of 50.4 from 50.9 in October. Economists were looking for a reading of 50.8. This was the first decline in five months.
“The optimism unleashed by China’s reform plan is today hammered by the reality of weaker economic data,” said Societe Generale economist Wei Yao.
The rosy eurozone growth estimates of a few months ago have bitten the dust already with the possible exception of Germany.
The Markit Flash Eurozone PMI signals slowing growth for second successive month in November, with France leading the way.
- Flash Eurozone PMI Composite Output Index at 51.5 (51.9 in October). Three-month low.
- Flash Eurozone Services PMI Activity Index at 50.9 (51.6 in October). Three-month low.
- Flash Eurozone Manufacturing PMI at 51.5 (51.3 in October). 29-month high.
- Flash Eurozone Manufacturing PMI Output Index at 52.8 (52.9 in October). Two-month low.
Hey Santa….I’m concerned about what I see in Retail!
CLICK ON CHART TO ENLARGE
Black Friday is a week from tomorrow and Christmas is just 34 days away. We all know the Christmas Season is very important to retailers. So what do the patterns look like leading into the important Christmas holiday season?
4 of the 6 retailers have created potential bearish patterns (Lowe’s, Target, Dollar Tree & Best Buy) and Wal-Mart and Home Depot might have created Triple Tops.
Should Santa be concerned about the “prices and patterns” in leading retailers? YES!