In this latest segment of of Maltbie's Minute on the Market, Singular Research's Robert Maltbie weighs in on the state of the current bull run and whether we've seen the last legs of the prolonged upward move.
Investors have to absorb increased volatility initiated by concerns that started with Greece, then China, as well as increased uncertainty about the Fed and earnings, combined with failing oil and commodity prices. What will be the impact on earnings as we go into reporting season? Is this a long overdue correction or something worse: the start of a new bear market?
Our indicators are still bearish. Technicals indicators are still negative, evidenced by lack of upside momentum and a generally weak tape. Biotechs,the last pocket of strength, are staring to take a hit, down 10-20%. Although the market is down 7-10% recently, it still does not look cheap, particularly if earnings are weaker than expected.
We are not ready to throw in the towel on this bull just yet, and here's why:
Corporate buying and M&A activity is picking up, offsetting recent selling by the public. The level of negativity is high. Bears outnumber bulls and puts are higher than calls, which is a positive contrarian sign. There is value as replacement costs are higher than total market cap, ex financials.
We think earnings season will beat expectations, based on a strong recent GDP report revised higher to 3.9%. Corporate balance sheets are strong, and there is a mountain of cash on the sidelines, totaling over $ 2.3 trillion.
So we are very cautious, especially during mutual fund tax loss season, but we don't believe this bull run is over, and we are waiting for a good time to get back in.
This is only the fourth time in the last 15 years where more than 70% of all stocks have traded below their 200 day moving average and each time we have witnessed an average 25% return within 12 months of the lows.
Visit us at millennium-asset.biz and check out our 15 track record. Of exceptional returns and out performance.
See you at the next round up.
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