Areas of Fear to Use as a Contrarian

By John Del Vecchio and Brad Lamensdorf The market is extremely overbought and greed is running high. It’s time for hedges. The CNN Fear & Greed Index is now at yearly highs after surging the past two months. The percentage of stocks over their 50-day moving average is also stretched to the upside. Sector breadth…

Is It Finally Time for Value Stocks?  In the summer of 1979, a BusinessWeek cover story pronounced “The Death of Equities.” Three years later in 1982 the stock market hit bottom and then rocketed higher. Since then the total return on the S&P 500 index with dividends reinvested has been more than 7,000%. This legendary…

Sector Sum Indicator is Warning Stock Market is Risky. The sector sum indicator measures the number of bull trends among the 45 industry sectors to determine market risk, and whether the market is about to reverse itself. The chart from Investors Intelligence shows the indicator is close to +30, which means most of the 45…

Q Ratio Indicates Stock Market Value Historically is Overpriced.  We use many indicators to analyze stock market value and future trends. One such popular indicator is the Q Ratio. It was developed by Nobel Laureate James Tobin to estimate the fair market value of the stock market for the long term. The ratio is the…

Huge Margin Debt Hangs Over the Stock Market Like the Sword of Damocles. As the chart below shows, investors have racked up huge margin debt in the hopes of increasing performance in a rising market. But that huge debt overhanging the stock market by a thread like the sword of Damocles means greater risk on…

By John Del Vecchio and Brad Lamensdorf The first half of 2022 was the worst start of the year for stocks in five decades. There could be much more damage to come. While equity returns were poor, we started the year with nosebleed valuations. As the chart below from Advisor Perspectives shows, the Buffett Equity…