Some stocks tend to go up consistently at certain times in the year. “Seasonality” refers to particular time frames during the calendar year when a company’s stock price is influenced by recurring forces that produce a consistent price direction – either bullish or bearish. Out-of-the-money put options Buy High-Probability Growth In-the-money call options Sell Low Probability Greed Out-of-the-money call optionsĨ OFI’s 10-Year Stock Seasonality Navigator
But the S&P 500 remains comfortably above its uptrending 10-month moving average, so the Ivy Portfolio market-timing system continues to flash a “fully invested” signal. The Investor Intelligence bull/bear ratio has been above 3 for most of the past five months, which is longer than any time since the 1980s. University of Michigan finance professor Nejat Seyhun: insider selling is “as pessimistic as I’ve ever seen over the last 25 years.” More pessimistic than in 2007 (before 37% bear market in 2008) and more pessimistic than in 2011 (before 20% market correction). Nasdaq/NSYE relative strength dropped decisively below its 10-week moving average for the first time since late September 2012. Present level is associated with projected annual total returns on the S&P 500 of just over 1.8% annually.”ĥ Other Warning Signs High-flying momentum stocks in the Internet (e.g., GOOG, FB, PCLN, NFLX) and biotechnology (e.g., ALXN, REGN, CELG, GILD) sectors have already begun to crack with steep corrections. John Hussman: “ since the 1940’s, the ratio of equity market value to GDP has demonstrated a 90% correlation with subsequent 10-year total returns on the S&P 500. stocks is $19.8 trillion Since 1970, only three times that market cap has equaled GDP: (148%) – Nasdaq lost 78% 2007 (111%) – S&P 500 lost 56% 2014 (118%) - ? Economics Ph.D. Warren Buffett: The percentage of total market cap relative to the US GDP is “probably the best single measure of where valuations stand at any given moment.” US GDP is $16.8 trillion and total market cap of U.S. Robert Shiller’s cyclically-adjusted 10-year P/E ratio is currently 28.4 vs long-term average: 81% overvalued. Right now, stock market is 75% overvalued, right near the overvaluation peak prior to previous bear markets. Yale economics professor James Tobin Q ratio: market price of stock divided by asset replacement cost Similar to book value, but better because market values, not accounting values Andrew Smithers (U.K.) maintains Q ratio: Stock market is overvalued whenever Q ratio is above its long-term average. 1 The Options Miracle System: How to Generate 30% Annualized Returns in a Stagnant Market With Limited Risk Jim Fink The Wealth Summit May 2014Ģ Chief Investment Strategist, Jim Fink’s Options for Income
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