Signs of a Top


Only a Fool Would Ignore These Major Red Flags

Justin Spittler
Nov 7, 2016

Signs of a market top are popping up everywhere. ..

We aren’t saying the market has topped… Only fools make calls like that. We’re saying it looks like the market’s topped. And it would be just as foolish to ignore these red flags. …

As you probably know, the S&P 500 set a new all-time high in early July…its first since May 2015. Normally, it’s a bullish sign when an index like the S&P 500 sets a new high. But U.S. stocks didn’t keep rising after “breaking out.” Instead, they’ve fallen. … That’s not a good sign. …

Earnings for companies in the S&P 500 have also fallen for five straight quarters. … Stocks almost never rise during such prolonged periods of declining earnings. …

Last month set a record for deal-making… But mergers and acquisitions (M&A) activity spiked before the last two major stock market crashes… Most companies don’t buy other companies when business is good… They buy other companies when their business is struggling. … We see the recent spike in M&A activity as a major red flag…

You see, the Federal Reserve has held its key interest rate near zero for the last eight years… This has made it incredibly cheap for companies to borrow money. … 

Companies have racked up huge debts even though corporate profits have been falling since 2014. And now, corporate balance sheets are weaker than they were during the last financial crisis. The Wall Street Journal reported last month:

Median debt at junk-rated companies is five times earnings before interest, taxes, depreciation and amortization, or Ebitda, according to Moody’s data. That compares with 4.2 times in 2008.

(More)

Advertisements

About icliks

Biding my time in central ms ... yours too, if ur reading this.
This entry was posted in economy, financial crash, Investing, market meltown, market timing and tagged , , , , , , , , , , , , . Bookmark the permalink.