Stock Market Indicators

Our Fundamental Stock Market Indicator (FSMI) is currently still bearish. Our FSMI is a good coincident indicator that can confirm or raise doubts about stock market swings. It fell for a sixth week to 100.1 during the week of May 12 since hitting a cyclical high of 109.3 in March. It fell 0.7% during the latest week, and 8.5% over the six weeks. Our FSMI is the average of our Boom-Bust Barometer (BBB) and Bloomberg’s Weekly Consumer Comfort Index (WCCI). The BBB increased for the second straight week (by a total of 2.5%) after falling the prior four weeks (by 6.6%).Jobless claims--a BBB component--fell for the second straight week (based on the 4-week average), from 384,250 to 375,000. The CRB raw industrials spot price index, another component, is falling again. The WCCI dropped for a fourth straight week, after having recovered to a new cyclical high.

Stock market sentiment Indicators are also turning more bearish. However, from a contrarian perspective this means that they are actually turning more bullish. The Investors Intelligence Bull/Bear Ratio dropped to 1.44 this week. It was at an 11-month high of 2.45 seven weeks ago. Bullish sentiment fell from 39.4% a week ago to a seven-month low of 38.3%. Bearish sentiment jumped to 26.6% from 20.4% two weeks ago, which was the lowest since last May. Those calling for a correction sank to 35.1% from a multi-decade high of 40.9% two weeks ago. The AAII Bull Ratio declined sharply for a second week from 55.4% to 33.9% the week of May 16. That’s the lowest reading since June 8, 2011. AAII bullish sentiment fell from 35.4% to 23.6% over the two-week period; bearish sentiment jumped from 28.5% to 46.0%. (See our Stock Market Indicators.)

Today Morning Briefing: In Governments We Trust. (1) The poster child for reckless governments. (2) The well-meaning road to ruin. (3) Fitch cuts Japan. (4) Japan has tried it all: Keynesian stimulus, ZIRP, and QE. (5) Scrambling to fashion another Grand Plan in Europe. (6) Is Europe “shovel ready” and ready for Eurobonds? (7) Growth financed by debt is “nonsense.” (8) The Golden State is our Greece. (9) Gov. Moonbeam dreaming about raising revenues with highest tax rates in the USA. (10) Wisconsin could put some holes in Democrats’ cheese. (11) Meet the true 1%. (12) Morning in America. (More for subscribers.)