Top Advisors Corner

Alan Newman: Crosscurrents January 9, 2017

Rationales & Targets

We were reminded a few days ago by our friend and savvy trader, Grant Nobel, that the Russell 2000 Index was about as overvalued as one might imagine, trading at infinity times earnings.  It’s bad enough to see the broad S&P 500 at a P/E over 26 and the Dow Industrials at a 21.4 P/E, but a 2000 stock index that shows negative earnings?!  Good grief.  One would think an index of 2000 small caps just generate something, anything in earnings.  Even a year ago, the Russell 2000 were trading over 152 times earnings.  Despite the obvious, that a few rotten apples have likely sabotaged the tally, it’s just another example of the lack of value in U.S. stocks.  There’s more, too.  The S&P Industrials are nearly 30 times earnings and those earnings have fallen 12.6% in the past year.  S&P 500 earnings have declined 8.4%.  And the earnings for the 30 venerable stocks in the Dow Industrials have shed 13.2%.  And a mania is underway.  We certainly live in interesting times.

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David O. England: Ask the Professor-Dow 20,000 and Predictions for 2017, plus more...

Q. Professor, how important is the DOW hitting 20,000?

A. First, I do not want to minimize the DOW Industrials run to 20,000.  I like the increased value of parts of my portfolios but realize I have not made one penny unless I sell and close the trade.  

With all the media cheerleading, I would be surprised if the DOW does not hit 20,000 by the second week of January, if not before.  Keep in mind; the DOW Industrials have thirty stocks and in no way represent the strength or weakness of the entire US stock market.

To hear a recent interview where I discuss the DOW 20,000 and my 2017 predictions, click here.

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Tom McClellan: Copper Leads The Way Lower for Bond Yields

Just a week ago, China was facing a banking system crisis that necessitated an injection of 375 billion yuan ($53 billion) into the money market, and that was after the prior week’s injection of 250 billion yuan ($36 billion).  But now, after Christmas has passed, the crisis seems to be abating.  That is good news for bond prices worldwide, including in the U.S. 

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David O. England: Ask the Professor Part IV...

Q. Professor, what charts are you watching to signal global opportunities?

A. Last week, I introduced my proprietary “Simple Simon” buy signal. As a trader, Investor and Financial Educator, I have used and taught dozens of indicators in the last twenty nine years.  My goal: perfect my trading system with no more than three factors, that leads to HPTs, higher probability/profitability trades. 

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David O. England: Ask the Professor Part III...

Q. Professor, with the post-election rally, what charts are you watching to signal global opportunities?

A. Last week, I featured my largest Global Economies ETF 2016 Performance chart to identify trading opportunities when the momentum slows.  It identified the Brazil Fund (EWZ) as the performance leader while the Italian Fund (EWI) was the laggard.  

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Tom McClellan: Lumber's Message For Interest Rates

The FOMC is now finally allowing interest rates to start moving where the market has already said they should have gone.  The 2-year T-Note Yield is already up to 1.27%, and the Fed is lagging behind in making an adjustment.  I have shown before that this can be a problem, having the Fed lag behind the message from the 2-year T-Note yield. 

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