Bull Market

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Low Stock Market Volume: It's Even Weaker Than You Think

By , Chief Investment Strategist, Money Morning • @ShahGilani_TW -

Conventional investing wisdom tells us that when stocks rally on low stock market volume, traders perceive that lack of widespread participation as an indicator of the market's future vulnerability.

And as torrid as this rally in U.S. stock prices has been, the lack of trading volume has been a consistent cause for concern.

Unfortunately for market bulls, even this well-chronicled concern doesn't tell the whole story. That's because U.S. stock market volume is even worse - actually, much worse - than anyone realizes. And this ultra-low stock market volume should be sending up some serious red flags for investors.

To find out how Wall Street is artificially inflating stock-market volume, read on ...

Question of the Week: Overlooked Problems Will Kill the U.S. Bull Market

By , Associate Editor, Money Morning -

The U.S. stock market has staged one of its most powerful rallies in history, zooming nearly 70% in the 12 months that followed the March 9, 2009 market low. U.S. stocks soared another 5% during the first three months of 2010 - its best first quarter in a dozen years. But where do we go from here?

Between the New York Stock Exchange continuously reaching new highs, the Dow Jones Industrial Average rising up along its eight-day average, and a rebounding retail sector, there's reason to celebrate what appears to be a market recovery offering investors profit opportunities.

"You can't bury your head in the sand and ignore what's happening," said Money Morning Chief Investment Strategist Keith Fitz-Gerald. "If you did that, you've missed a 60%-plus rally in the [Standard & Poor's 500 Index] since early last March. You cannot fail to acknowledge what's happening" in the markets, even though top traders understand that cheap money from the government bailout - and not a well-rounded economic recovery - is most likely behind the torrid run-up in U.S. share prices.

Money Morning Question of the Week: Is this a true bull market? A year from now, are U.S. stocks - as measured by the Standard & Poor's 500 Index - trading higher, lower, or at the same level as they are today?

What follows are some of the most well thought-out responses we received (as well as a previous comment regarding the bull vs. bear market argument posted on our Web site) with many agreeing this bull market is too good to be true.

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Why the Outlook for U.S. Stocks Could be Much Better Than You Think

By , Executive Editor, Money Morning -

Could the U.S. bull market actually be for real?

That's the question investors have been asking since U.S. stocks essentially bounced off of their March 2009 post-crash lows - only to be launched into one of the strongest rallies in U.S. market history.

More than a year later, U.S. investors still don't know what to believe - or what to expect, says Jon D. Markman, a market commentator and best-selling author who is also a Money Morning contributing writer. The most recent sentiment poll by the American Association of Individual Investors, or AAII, showed that only 41% of investors are bullish. Cash flows at mutual funds that invest in U.S. stocks are telling a similar story, with a $5.1 billion monthly outflow, Markman says the most recent data shows.

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Buy, Sell or Hold: BHP Billiton is Poised to Pick Up Big Gains on the Back of a Global Commodities Bull

By , Contributing Editor, Money Morning -

Face it, commodity prices are in a secular rally - and there are three big reasons why.

  • Loose Monetary Policy
  • Growing Demand in Emerging Markets
  • And the Congruent Devaluations of Major CurrenciesWe've already profited from this inflationary trend in the Money Map VIP Trader.  And - just like I did with the broadband revolution - today I am presenting you with a stock that stands to benefit from these developments - BHP Billiton Ltd. (NYSE ADR: BHP).
First, let's talk about policy. Immediately following the 2008 financial crisis, the Group of 20 (G20) countries agreed to stimulate their economies simultaneously.  And, while the emerging economies almost unanimously have already returned to strong rates of growth, most advanced economies are just now turning the corner.

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The Bull Market is Intact and On the Move

By , Contributing Writer, Money Morning -

Bears have been scratching for a vulnerable spot in the bulls' narrative in the past few weeks, but have been coming up empty, as they logged a blistering March.

Sellers tried to sink the market back in February as the long-simmering Greek debt fiasco roared into the headlines, but that didn't work out so hot for them. And early last week they tried again by both highlighting new reports of discord between the European Monetary Union authorities and Greece, and by flogging the news of a Fitch Ratings Inc. downgrade of Portuguese debt.

At some point, portfolio managers outside of Europe may decide that they care about these matters but for now there has been what you might call a Gallic shrug. Tant pis, as the French say.

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Despite the Near-Record Run in U.S. Stocks, Oil, Commodities and China Will be the Long-Term Winners

By , Executive Editor, Money Morning -

Although U.S. stocks have made a fairly smooth transition into Year Two of what's so far been a near-record bull market, there are still many traps that can quickly ensnare a less-than-cautious investor.

Moving forward, investors need to focus on quality, take the time to understand what's really happening in Washington, and turn to such once-unconventional investments as oil, commodities and China stocks, says Money Morning Chief Investment Strategist Keith Fitz-Gerald.

"I expect the markets to remain very fragmented. Volatility will almost certainly increase, leaving investors both psychologically scarred and totally confused," Fitz-Gerald said, underscoring the need for investors to embrace a truly global view. "Fully 75% of the economic activity on the planet now takes place outside U.S. borders. So it only makes sense that investors embrace new ways of thinking in order to avoid getting left behind. At the same time, energy and commodities still have a long way to run - meaning there's substantial profit potential available."

In a wide-ranging interview, the former professional trade advisor, best-selling author and noted Asia-investing expert:

  • Predicted that oil and commodity prices are headed higher, making them "must-invest" asset classes for investors who don't want to be left behind.
  • Stated that ongoing miscues in Washington coupled with higher growth abroad make it imperative that U.S. investors embrace a truly global view when planning their investing strategies.
  • And predicted that many blue-chip U.S. companies will go for dual-listings, listing their shares on China's Shanghai Stock Exchange (SSE), providing those U.S.-based firms with access to the plentiful capital and robust growth available in that Asian giant's marketplace.

For a full transcript of this interview, read on...

Bulls Vs. Bears: Who's Winning Wall Street's Biggest Battle?

By , Contributing Writer, Money Morning -

Two big economic reports dampened the mood on Wall Street in the past week: The Standard & Poor's/Case-Shiller Home Price Index and the Conference Board's Consumer Confidence Index.

But despite what the bears would have you believe, several strong companies have shrugged such data aside and broken through to new highs. In fact, long-term, we continue to see evidence that a robust business-led recovery is underway.

To find out what companies are leading a new bull market click here...

Is it Time For Investors to Beware of the Bear?

By , Contributing Writer, Money Morning -

With U.S. stocks down about 5% from their 2009-2010 rally peak, investors basically want to know one thing: Is this just a correction, or are they looking at a potentially long bear market?

That's no small question. U.S. stocks could be experiencing one of three scenarios at present. They could be:

  • Undergoing a short-term "correction" of its 2009 gains.
  • Beginning a multi-month "pause."
  • Or starting a new bear-market cycle.
These aren't just arbitrary labels. For instance, a typical "correction" lasts but a month or two, with average declines of 8.5% to 10% on the Standard & Poor's 500 Index. A multi-month pause, by contrast, could last eight to 15 months, and involve an S&P 500 decline of 10% to 18%.

But a new bear market is an entirely different animal. A bear-market cycle could last as long as two years and could be marked by a decline of 20% or more.

To learn the warning signs of a new bear market, please read on ...

Europe-China Connection Could Rattle Stocks

By , Contributing Writer, Money Morning -

I was watching the Asia Edge show on Bloomberg television Wednesday night when the lovely and smart Susan Li broke in breathlessly on her guest with news about China's consumer inflation numbers. Inflation was reported up just a touch in January, which was considered good news because if it was higher it would have made Chinese banking authorities more anxious to clamp down on interest rates and if it was lower it would have raised the awful specter of deflation.

The Shanghai stock market ended a fraction higher, so it was a bit anticlimactic. But the key thing to know is that the Chinese market still appears to be in a downtrend and that bodes ill for the rest of the emerging markets. The 50-day moving average of iShares FTSE/Xinhua China 25 Index (NYSE: FXI) has turned emphatically negative, as has the slightly longer 100-day average. The index fund also is already beneath its 200-day average, which tends to distinguish bull cycles from bear cycles.

Read more about the Europe-China connection...

Will Copper Become the "New Gold?"

By , Money Morning -

The Statue of Liberty is one of the most recognizable American icons in the world.

And as she towers 305 feet above Ellis Island, what's Lady Liberty wearing? Copper - 60,000 pounds of it.

Clearly, copper's big in art. It's also a key metal that keeps the world economy humming. Copper consumption has grown at an average annual rate of 4% since 1900. China and India - which some analysts describe as the combined market of "Chindia" - where one of every three human beings resides, needs loads of this element to meet its modernization requirements for electricity and infrastructure.

Copper is also used in today's currency, where most U.S. coins are actually 92% copper, and 8% nickel.

But there's no denying that, given the choice, nearly everyone prefers gold. It's valuable, it's seductive and it's mystical.

Ancient kings fought wars to amass it. Yet, for thousands of years, its most enduring role has arguably been in the form of money - as a store of value.

That's because fiat-paper-currency experiments have never lasted, and always ended badly.

Increasingly, followers of the Austrian School of Economics are nostalgic for gold to regain its former glory, perhaps "backing" a new international currency.

But despite gold's much longer history as true money, some believe that copper - the much humbler metal - could be positioning itself to upstage gold.

To find out more about the forces that will transform copper into the "New Gold," read on...

History Says Lost Decade For Stocks Should Lead to a New Bull Market ... But Will It?

By , Contributing Writer, Money Morning -

In its 1969 song "Spinning Wheel," the rock group Blood, Sweat & Tears immortalized the phrase "what goes up, must come down."

I cite this bit of music trivia in an investment story for two reasons: First, the name of the band fairly well describes the conditions attached to the stock market's historically sad performance over the just-completed decade. Specifically, a lot of blood, sweat and tears - thankfully followed by a tiny bit of healing in the final eight months of 2009.

Second, for those more attuned to mathematical theory than music, the market results for the 10 years from 2000 to 2009 provide the basis for a prediction for the coming decade - one essentially the inverse of the band's famous phrase. To be more precise, "what went down, must now come up."

That forecast is based on a fairly simple principle: Things that move in wave patterns - such as the stock market - have an overwhelming tendency to "revert to the mean." In other words, when stocks perform well above their long-term historical norm (known as the "arithmetic mean") for an extended stretch, they usually have to underperform for an extended period to get back in line with that long-term mean.

Conversely, when stock-market performance is well below the norm for a long stretch, it theoretically should enjoy an extended run well above the historical mean in order to bring the market's performance back in line with the long-term norm.

And the decade we've just completed was definitely far below that norm.

The prediction is also based on historical precedent, as demonstrated by past per-decade performances of the major stock market indexes.

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Current "Bull Market Monday" Trend Points the Way to Maximum Market Profits

By , Contributing Writer, Money Morning -

Call it the "Bull Market Monday" syndrome.

In fact, if weren't for the last month and a half of Mondays, the U.S. stock market would be a very dour place right now.

Since the start of the 2009 fourth quarter, the Standard & Poor's 500 Index has posted positive returns on 14 of the last 16 Mondays, with an average gain of 0.85% on that first day of the week (See accompanying graphic), the Bespoke Investment Group said in a research report last week.

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How to Make the Most of a Resurgent M&A Market in 2010

By , Contributing Writer, Money Morning -

Unlike this time last year, prospects for U.S. corporate mergers and acquisitions (M&A) appear robust heading into the new year. And that bodes well for investors astute enough to identify the sectors where action will likely be hottest.

As an indication of the improving outlook, nine deals with a total value of $19.9 billion were announced from the start of December through Christmas Eve. That came on top of November's 14 M&A announcements, which were valued at $63.175 billion - although that number was distorted somewhat by Warren Buffett's $26.52 billion bid for the 78% of Burlington Northern Santa Fe Corp. (NYSE: BNI) he didn't already own.
 

By contrast, archives of merger-tracking Web site The Online Investor,  show 15 deals involving publicly traded U.S. stocks in December 2008, but the total value was a meager $3.986 billion. (That's not counting the $8.8 billion merger of Japanese electronics giants Panasonic Corp. (NYSE ADR: PC) and Sanyo Electric Co. (OTC: SANYY), which brightened the global picture somewhat.) November 2008 had 14 deals valued at just $4.898 billion.

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Which Sector Will Step Up and Lead Bulls in 2010?

By , Contributing Writer, Money Morning -

Digging beneath the surface of the late 2009 market for clues, we find that some measures of breadth continue to deteriorate even as the major indices continue to float near their highs. For example, the percentage of stocks above their 10-day moving average has gone from 81% on Christmas Eve to 71% now. This is an indication that buyers have become more selective.

This adds to a trend that's been developing over the last few months. While the NASDAQ has managed an impressive breakout from its multi-month trading range, it's doing this on the back of fewer and fewer stocks based on the number that are over their 50-day moving average. Part of the problem is the lack of clear market leadership.

One of the reasons that the bull cycle of the past year has been so strong is that it had a rotating cast of leaders: First banks, then retailers, then tech, then energy, then materials, and so on.

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