Fads Come and Go

Fads come and go.

Below is a list of some of the more popular/trendy/fad/meme stocks and favored gambling vehicles of the last couple years alongside their respective 52-week highs and current prices.

It’s important to understand what’s happening beneath the surface. A breakdown of internals can be an early indicator of a downtrend.

In fact, this morning I came across a stat that over one-third of NASDAQ stocks are down over 50% from their peaks!

You might not know it from looking at the headline indices but things continue to rot under the surface. Continue reading “Fads Come and Go”

S&P 500 “Line in the Sand” and Rotation Out of Growth Stocks?

It appears a line has been drawn in the sand at $3,900 on the S&P 500 as the widely-watched index has crossed that level several times over the last month (see chart below). Thus far, the S&P 500 has been directionless since the beginning of February.

Over the weekend, I assumed Senate passage of the $2 trillion “relief” bill, and likely passage in the House this week, would have been sufficient to thrust the S&P above 3,900. However, so far, even that has not provided enough fuel to support the next leg higher. Has the market already priced this in? A “buy the rumor, sell the news” dynamic? Continue reading “S&P 500 “Line in the Sand” and Rotation Out of Growth Stocks?”

Even Some Technicals Are Now At Historical Extremes

I’ve written extensively about how valuations of the U.S. stock market are at historical extremes exceeding even 1929 and 2000. I’ve discussed how valuations are not at all reliable for predicting short-term movements but quite reliable for predicting returns over the next 10-12 years and, so, can be valuable for financial planning and investment strategy.

The implication of extreme valuations today being that annualized returns for U.S. stocks will likely be much closer to 0% than their 10% historical average over the next 10-12 years and with a lot of volatility in the interim.

However, now, we’re starting to see technicals hit historical extremes as well. Technicals are often-used for predicting short-term movements and identify key trading signals although they are still far from reliable.

They are interesting to at least monitor in order to get a feel for the market, investors attitudes towards risk, key trading signals others may be using, etc… Continue reading “Even Some Technicals Are Now At Historical Extremes”