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Author Topic: Major sell signal in the Stock Market - 6th time in 123 years  (Read 418 times)

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Offline Matthew

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Major sell signal in the Stock Market - 6th time in 123 years
« on: September 10, 2018, 08:06:45 PM »
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  • The Stock Market’s Latest Sell Signal Has Happened Only 5 Other Times Since 1895
    August 22nd, 2018

    Via: Marketwatch:
    The “Sound Advice Risk Indicator” … the brainchild of Gray Cardiff, editor of the Sound Advice newsletter, is derived from the ratio of the S&P 500 SPX to the median price of a new U.S. house. For the first time since the late 1990s, and for only the sixth time since 1895, this indicator has risen above the 2.0 level that represents a major sell signal for equities.
    The investment rationale underlying this indicator, according to Cardiff, is that it “measures the struggle for capital” between the two major asset classes that compete for capital at the riskier end of the spectrum — stocks and real estate. When the indicator rises above 2.0, he argues, it means that the stock market has absorbed “a larger proportion of available investment capital than economic conditions can justify” and, therefore, it is in “imminent danger of falling.”
    To be sure, Cardiff is quick to emphasize, his risk indicator is not a short-term market timing tool. In the wake of past occasions when it rose above 2.0, for example, equities stayed high or even continued rising “for many months, sometimes even a couple of years.” However, he continues, “in all cases, a major decline or crash followed, pulling down stock prices by 50% or more.”

    Related: America Is Overdue for Another Economic Disaster
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    Offline Stubborn

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    Re: Major sell signal in the Stock Market - 6th time in 123 years
    « Reply #1 on: September 11, 2018, 07:04:52 AM »
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  • Often when stories like this come out, the market does the opposite. It is a very difficult game to guess which way the crooks actually will take it though.

    The S&P 500 represents 500 stocks, the Dow represents 30 stocks, the Nasdaq, 100 stocks, the Russel, 2000 stocks - and because the Russell represents 2000 stocks, it represents a much broader market, it is generally a much, much better gauge of the markets overall and most often the other markets follow it's direction, this makes the Russell a type of leading indicator.  

    Since the article was published till now, the markets have not really moved a whole lot.  

    So just for fun for future reference, as of the close on 09/10/2018, which is about 3 weeks after the article was published, here are the closing numbers to see which way it actually ends up going, just to check the accuracy of the article's "sell signal":

    S&P 2877
    Dow 25857
    Nasdaq 7924
    Russell 1717


    I say that it is licit to resist the Roman Pontiff by not doing what he orders and by impeding the execution of his will; it is not licit, however, to judge, punish or depose him, since these are acts proper to a superior." St. Robert Bellarmine


    Offline Matthew

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    Re: Major sell signal in the Stock Market - 6th time in 123 years
    « Reply #2 on: September 11, 2018, 07:49:47 AM »
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  •  

    Since the article was published till now, the markets have not really moved a whole lot.  

    So just for fun for future reference, as of the close on 09/10/2018, which is about 3 weeks after the article was published, here are the closing numbers to see which way it actually ends up going, just to check the accuracy of the article's "sell signal":

    S&P 2877
    Dow 25857
    Nasdaq 7924
    Russell 1717




    I think you missed a key paragraph:
    To be sure, Cardiff is quick to emphasize, his risk indicator is not a short-term market timing tool. In the wake of past occasions when it rose above 2.0, for example, equities stayed high or even continued rising “for many months, sometimes even a couple of years.” However, he continues, “in all cases, a major decline or crash followed, pulling down stock prices by 50% or more.”
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    Offline Stubborn

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    Re: Major sell signal in the Stock Market - 6th time in 123 years
    « Reply #3 on: September 11, 2018, 09:51:48 AM »
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  • I think you missed a key paragraph:
    To be sure, Cardiff is quick to emphasize, his risk indicator is not a short-term market timing tool. In the wake of past occasions when it rose above 2.0, for example, equities stayed high or even continued rising “for many months, sometimes even a couple of years.” However, he continues, “in all cases, a major decline or crash followed, pulling down stock prices by 50% or more.”
    I actually saw that but it's the same old ploy imo. It's not much of an indicator if it can't really be timed at all, or at least enough to be useful to some extent. I mean honestly, who can use that indicator? When is it best to sell, or buy for that matter using that as an indicator? Anyone can say - "my indicator never fails and it is showing that the market will go down sometime between many months from now to a couple of years". lol  As a "major sell signal", it is extremely lame at best, imo.

    I say that it is licit to resist the Roman Pontiff by not doing what he orders and by impeding the execution of his will; it is not licit, however, to judge, punish or depose him, since these are acts proper to a superior." St. Robert Bellarmine

    Offline Peter15and1

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    Re: Major sell signal in the Stock Market - 6th time in 123 years
    « Reply #4 on: September 17, 2018, 07:26:56 AM »
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  • I think you missed a key paragraph:
    To be sure, Cardiff is quick to emphasize, his risk indicator is not a short-term market timing tool. In the wake of past occasions when it rose above 2.0, for example, equities stayed high or even continued rising “for many months, sometimes even a couple of years.” However, he continues, “in all cases, a major decline or crash followed, pulling down stock prices by 50% or more.”
    So the warning essentially is . . . at some point in the future, perhaps months, perhaps years, the stock market will go down.  Not much of a prediction.  I can make the some prediction, and be correct, without any kind of algorithm or analysis.

    That's like telling kids not to play outside because there is going to be a dangerous thunderstorm at some point in the future.  You're not sure when, but it will happen eventually.  In other words, a pretty useless prediction that does nothing but scare people.


     

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