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Category: Chart of the Week

Why Huge Problems at Nomura and Deutsch Bank Could be Troubling for the Stock Market

After years of mismanagement, Japan’s Nomura and Germany’s Deutsch Bank are in deep trouble. As the charts below show, their stocks are at multi-year lows while the stock market is at near-record highs. Why should we worry? Both financial giants are tremendously overleveraged. They are servicing billions and trillions of dollars in swaps and derivatives. Since financial institutions globally are so closely linked via trading and other businesses, a market-forced restructuring, including massive asset sales, could spread like cancer to other institutions and the global markets.

Why Huge Problems at Nomura and Deutsch Bank Could be Troubling for the Stock Market
Why Huge Problems at Nomura and Deutsch Bank Could be Troubling for the Stock Market

Delinquent Auto Loans Are Climbing

As the chart below shows, the number of auto loans that are more than 90 days delinquent is climbing. Among the reasons: More loans to less credit-worthy consumers.  This often occurs in mature stages of economic booms as a way for the automobile industry to bolster sales.

Delinquent Auto Loans Are Climbing
Delinquent Auto Loans Are Climbing

Appetite for IPOs is a Fascinating Study in Sentiment.

The appetite for IPOs is a fascinating study in sentiment. In all the market changes over the decades, that has been one constant.
Three years ago, we saw that sentiment was so skittish that it had been months since an IPO had priced above its indicated range. By October 2018, not only had the market thawed, but investors were more than willing to buy into new issues that had no record at earning money.
In the coming months, if the market holds somewhat together, we’re likely to set all kinds of records for IPOs. None of them are good longer-term signs for stocks.
On a rolling 36-month basis, we’re already seeing a near-record of billion-dollar IPOs. The only two times that (barely) eclipsed the current streak were in the fall of 2000 and spring of 2015.

The appetite for IPOs is a fascinating study in sentiment
The appetite for IPOs is a fascinating study in sentiment.

Thursday’s reception to Beyond Meat, giving a multi-billion-dollar valuation with a rousing first-day reception to a company that barely makes money and is trading at more than 40 times revenue, should be a sign that we’re not in 2016 anymore. ( This study was created by www.SentimenTrader.com ).

S&P 500 Bullish Percent Index Signaling Market is Overbought

There’s obviously no sure-fire way of determining when the stock market has bottomed, and it is time to buy. Or, for that matter, when it is near a top and it is time to head for the sidelines. However, the S&P 500 Bullish Percent Index is regarded by market professionals as a tool that historically has proven to be helpful as a contrarian indicator of when the market is getting overbought or oversold. The Investors Intelligence point and figure chart below shows that 77% of the stocks in the S&P 500 when given equal weight are showing buy signals. Anything over 70% historically means the market is overbought and ripe for a downturn. Contrast that to last December when the index was showing the great majority of stocks with sell signals, and only 18% with buy signals. When fewer than 30% of the stocks are showing buy signals that historically means the market is becoming oversold and ripe for a turnaround.

S&P 500 Bullish Percent Index Signaling Market is Overbought
S&P 500 Bullish Percent Index Signaling Market is Overbought

Stock Market Risk Grows with Explosion of Negative-Earning IPOs

As the chart from Topdown Charts shows about 76% of recent IPOs have gone public with negative earnings. That’s a near record, matching 1999 and only surpassed by 2000 when the dot.com bubble burst. Why is this an ominous sign? Historically the percentage of risky IPOs increases dramatically near market tops. That’s because investors have become overly optimistic and are willing to make increasingly speculative bets.  And that also spells opportunity for venture capitalists and bankers to sell and profit from increasingly risky IPOs as long as investors are willing to place their bets.

Stock Market Risk Grows with Explosion of Negative-Earning IPOs
Stock Market Risk Grows with Explosion of Negative-Earning IPOs

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