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Problems Keeping 2014 Market Flat Are Obvious

  • Written by Syndicated Publisher No Comments Comments
    March 29, 2014

    As the first quarter draws to a close, it remains that the market has gone nowhere so far in 2014. For the year so far, the Dow is down 1.9%, the S&P 500 and Nasdaq are exactly unchanged, and the Russell 2000 is down 0.1%. It couldn’t be any flatter than that.

    The problems that have investors, particularly institutions, and corporate insiders, nervous, are well known:

    The market’s valuation situation is worrisome. The Shiller CAPE P/E ratio, at 25.4, is now 53.9% above its historic mean of 16.5. The P/E ratio based on reported GAAP earnings over the last four quarters is 19.8, at the threshold of what has often been the danger area of over-valuation by that measurement.

    The bull market is old by historic standards. The average length of bull markets over the last 113 years was 53 months, with very few lasting longer than the average. The current bull is now 60 months old.

    We are in the 2nd year of the Four Year Presidential Cycle, and over the last 80 years the average decline in the 2nd year was 21%.

    The main driving force throughout the bull market was the Fed’s increasingly massive QE stimulus. It is now being cut as swiftly as it was brought on, now at $55 billion a month, down from $85 billion three months ago, and will be cut to $45 billion soon (in April).

    Meanwhile, even with the massive stimulus, the economy (GDP) grew only an anemic 1.9% last year, down from 2.8% in 2012. Forecasts for the first quarter of this year, ending in a few days, are for GDP growth of less than 2%.

    And problems in global economies and markets outside of the U.S. have cropped up again.

    That has been enough to have bullish investors nervous and reluctant to believe Wall Street’s assurances that all will be well once economic reports prove the winter slowdown was weather related.

    But, neither have bears been able to get anything sustainable going on the downside. The market is down from its recent peaks, back to its levels at the end of December, but only to potential short-term support levels again.



    It does have us watching our intermediate-term, and even long-term, indicators closely.

    To read my weekend newspaper column click here: The U.S Market is Swimming Against an Ominous Global Tide

    Images: Flickr (licence attribution)

    About The Author – Sy Harding, Street Smart Report

    Sy Harding publishes the financial website Street Smart Report Online and a free daily Internet blog at Sy’s Free Blog. In 1999 he authored Riding The Bear – How To Prosper In the Coming Bear Market. His latest book is Beat the Market the Easy Way! – Proven Seasonal Strategies Double Market’s Performance!

    It includes our research and analysis on the economy and markets, and provides charts and buy and sell signals on the major market indexes, sectors, bonds, gold, individual stocks and etf’s, including short-sales and ‘inverse’ etf’s.

    It provides two model portfolios as guides. One is based on ourSeasonal Timing Strategy, one on our Market-Timing Strategy.

    In depth updates are provided every Wednesday, with interim ‘hotline’ updates every time we make a trade. An 8-page traditional newsletter Street Smart Report is provided on the website every 3 weeks, in pdf format for viewing or printing out.

    There is the Street Smart School of online technical analysis ‘seminars’,commentaries to keep you ‘street smart’ about Wall Street, and much more. 


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