Inside The Stock Market ...trends, cross-currents, and outlook

So far so good, as sales and earnings numbers reported have been better than expected. Eric Weigel explores newly emerging trends from a number of angles and makes some cautious inferences.

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Methodology for the new screen and the Dividend Sustainability Rank are discussed in detail. Dividend strategies continue to gain popularity, as equity investors grapple for yield.

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Despite the big October rebound, Doug Ramsey examines various market players and finds that dissatisfaction with recent market moves may proliferate among all but a select few.

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Does a simple twist on the ISM Index produce an excellent stock market indicator?

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A new High Quality Cycle has clearly emerged and is going strong. Note that the previous High Quality Cycle started at the end of 2007 and lasted more than a year.

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Most costly market decoy in the last six weeks has been unusual (relative) strength of the Dow and S&P 500 indexes. Resilience in blue chips is characteristic of the early and middle phases of a bear market, but recent blue chip performance has been so stellar (again, in a relative sense) that most investors curled up comfortably in the “correction” camp…while small caps, cyclicals and virtually all foreign markets were screaming “BEAR!”

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Better understanding the behavior of equity market volatility is a prerequisite for making improved decisions either as a way to profit directly from the changing nature of volatility, or as a way to hedge equity market exposure.

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Several U.S. indexes and world stock markets have already lost 20% or more from recent peaks, satisfying the parameter for a bear market.

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The yellow metal itself celebrated 40 years of “independence” by pulling ahead of the S&P 500 on a cumulative, total return basis since the gold window was closed.

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Doug Ramsey provides an analysis of non-recession related bear markets. Historically, non-recession related markets are shorter in duration than recession induced bear markets, but the decline is essentially the same magnitude.

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Interesting development coming out of China recently that is getting little attention. The Chinese government is planning to allow ETFs with Hong Kong listed companies as underlying securities to be traded on the Shanghai and Shenzhen Exchanges.

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Major Trend Index fell to Negative at beginning of August. Assumption is that we are now in the beginning of a cyclical bear market that may produce a 20%-25% loss within the next six months or so.

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The 30-point collapse in the S&P 500 on Tuesday, August 2nd completed a bearish H&S pattern that has been several months in the making.

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The Leuthold Group has always been a big proponent of sector rotation strategies. In this month’s “Inside The Stock Market” section, Jun Zhu examines sector rotation in emerging markets and presents a series of ETFs that facilitate this strategy.

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Chinese Pharmaceuticals have been sold off considerably in recent months, but look very attractive on a valuation basis. There are fundamental problems, but in light of China’s objective of universal health care coverage there is significant upside. See “Healthy Tigers” update in “Inside The Stock Market”.

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The risk premium for stocks is making a comeback. Our quarterly examination of the stock/bond performance differential finds ten-year Treasuries are now the riskier asset class compared to equities.

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MTI studies of market values, investor psychology and price action have (so far) overwhelmed the economic “elephants in the room.” A few thoughts on those elephants.

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Jun Zhu examines Chinese companies with Variable Interest Entity (VIE) structures. Investors shouldn’t be completely turned off by concerns over these structures, but it would be wise to heed the risks.

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Another breadth blastoff gives us reasons for optimism that our bullish predictions for the end of the year will hold.

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Looking to profit from the boom in domestic natural gas production? Dave Kurzman examines the opportunities and potential pitfalls in Shale gas, and finds some viable investment opportunities, but urges caution.

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