The Omni Intelligencer

Sell your house faster for more. auction-style-property-sale
  Tuesday, May 24, 2016  Home > Money > Finance > Investment > Two Key Indicators Waving Caution Flags
Follow us on Twitter
Every Dollar Helps
Donate using PayPal
Amount:

Two Key Indicators Waving Caution Flags

| More

There's no question that the rally we've seen in markets up to this point in the year has been impressive. Through the end of last week, the S&P 500 was up almost 9 percent and we're not even through two full months of 2012!

The rally has been fueled by ultra-accommodative measures taken by the world's central banks along with better than expected economic numbers here in the U.S. and in Europe.

Mainstream media is helping fuel investor  complacency.
Mainstream media is helping fuel investor complacency.

Surprisingly, given the rough year of 2011, I almost sense some complacency in the markets, as evidenced by recent consumer confidence numbers hitting one-year highs, and a Barron's cover calling for Dow 15,000.

Savvy contrarian investors, however, know to look beyond the headlines and past the major averages for clues as to the market's next moves.

And when we look past the impressive performance of the S&P year to date, we can see some leading indicators that warrant a level of concern ...

The first is the Dow Transportation Index. This index tends to rally before the rest of the market turns up, and it falls before a general market decline.

The reason for this is quite logical: The Dow Transports, as they are known on the Street, is made up of companies like Fed Ex, UPS, and others that are on the leading edge of the economy. When the economy is growing, their stocks do very well because businesses are shipping goods around the world. And when the economy is contracting, these companies are the first to feel it.

It's a bit concerning then that the Dow Transportation Index did notconfirm the new high we saw in the general market a little over a week ago. This divergence between the two indices has historically been a warning sign that the market may not be as healthy as everyone thinks.

The second leading indicator is the small cap sector. The Russell 2000 has also shown some relative weakness here, stalling while the larger cap indices like the Dow and S&P have made new highs. You can easily see the divergence in the chart below.

Small cap companies, like the transportation sector, are very economically sensitive. And they can fall, or pause first, before the rest of the market heads south.

Professional traders often look at the "internals" of a market, not just the bigger averages, for clues into the future direction. And these two internal indicators are throwing up a caution flag.

But just because the market seems poised to take a header doesn't mean you have to sit on the sidelines and watch the life getting sucked out of your portfolio ...

Inverse ETFs with exposure to these leading sectors of the economy, such as the ProShares Ultra Short Russell 2000 Growth ETF (SKK), can be a good hedge to existing long positions you may have. Or you could consider them as investments to profit from a correction.

Another idea is investments that are out of favor, or that the crowd hasn't caught wind of yet.

Source: moneyandmarkets.com


Sell your house faster for more. auction-style-property-sale
| More
 

Current Headlines - Finance

  • Revenue, earnings slightly ahead at Keller Group 24 May 2016 | 4:20 am

    (ShareCast News) - As investors gathered for Keller Group's annual general meeting on Tuesday morning, the ground engineering specialist revealed its numbers were ahead of last year in year-to-date trading....

  • Head of TSA security operations removed from position 24 May 2016 | 12:42 am

    Kelly Hoggan, head of security for the U.S. Transportation Security Administration, is seen in an undated picture from the Transportation Security AdministrationWASHINGTON (AP) — A House committee said Monday that the head of security operations at the Transportation Security Administration has been replaced.


  • Clinton campaign declines invitation to California debate 23 May 2016 | 7:23 pm

    Democratic presidential candidate Hillary Clinton meets with Service Employees International Union (SEIU) members at the union's 2016 International Convention, Monday, May 23, 2016, in Detroit. (AP Photo/Carlos Osorio)WASHINGTON (AP) — Democratic presidential front-runner Hillary Clinton on Monday declined an invitation from Fox News to participate in a debate with rival Bernie Sanders in California before that state's June 7 primary.


  • Wall Street edges higher thanks to gain by Apple 23 May 2016 | 7:16 pm

    Traders work on the floor of the NYSEWall Street edged higher on Monday as a bounce in Apple helped offset growing concerns that the U.S. Federal Reserve could raise interest rates sooner than later. The timing of future Fed rate hikes in the face of a sluggish economy is a major focus among stock investors who have benefited from historically low borrowing costs since the 2008 financial crisis. San Francisco Fed President John Williams and his St. Louis counterpart, James Bullard, both struck hawkish tones in separate appearances on Monday.


  • Va. school board votes to require students to use bathrooms matching their biological gender 23 May 2016 | 6:06 pm

    Va. school board votes to require students to use bathrooms matching their biological genderThe Grayson County School Board in Virginia has voted unanimously in favor of requiring students to use locker rooms and bathrooms matching their biological gender.


  • Virginia governor under FBI probe over campaign donations: CNN 23 May 2016 | 5:41 pm

    Virginia Democratic governor elect McAuliffe speaks to supporters at victory rally in VirginiaTerry McAuliffe, Virginia's Democratic governor and chairman of Hillary Clinton's 2008 presidential run, is under federal investigation over contributions to his 2013 campaign, CNN said on Monday, citing unnamed U.S. officials. The U.S. Justice Department's year-long investigation has focused, at least in part, on whether contributions to McAuliffe's gubernatorial campaign, including $120,000 from a Chinese businessman, Wang Wenliang, violated the law, according to CNN. Investigators have "scrutinized" McAuliffe's time as a board member of the Clinton Global Initiative, part of the charitable foundation set up by former President Bill Clinton, CNN said, citing unidentified government officials briefed on the case.


  • $30M donation brought NFL another crisis of credibility 23 May 2016 | 5:21 pm

    NFL logo and set are seen at New York's Radio City Music Hall before the start of the 2013 NFL DraftThe NFL has done some important work making football safer, from the pro level on down. Yet it continues to destroy any chance for that narrative.


  • U.S. ability to police 'shadow banking' under threat - senator 23 May 2016 | 4:05 pm

    Brown talks to reporters between a series of votes at the U.S. Capitol in WashingtonRecent moves in the U.S. Congress and courts could defang the country's overarching financial regulatory council when it comes to policing "shadow banking," the most powerful Democrat on the Senate Banking Committee said on Monday. Senator Sherrod Brown, who has been mentioned as a possible vice presidential pick, wrote to Treasury Secretary Jack Lew about possible threats to the council's regulatory reach in the area. Lew is the chair of the Financial Stability Oversight Council, which is made up of the chiefs of the country's financial regulatory agencies and was formed through the Dodd-Frank Wall Street reform law in 2010 to head off a repeat of 2008's massive financial meltdown.


  • Doubts mount over merger of health insurers Anthem, Cigna 23 May 2016 | 3:43 pm

    The office building of health insurer Anthem is seen in Los Angeles, CaliforniaWall Street expressed growing doubts about a pending $54 billion (£33 billion) merger of U.S. health insurers Anthem Inc and Cigna Corp on Monday as news of management squabbles added to concerns over its review by antitrust regulators. Cigna shares closed down 4 percent at $126.15, well below Anthem's original $188 per share offer of cash and stock announced last July. "The market is telling you that it feels the probability of the deal is significantly less than 100 percent," Morningstar analyst Vishnu Lekraj said in a telephone interview.


  • Wall Street dips; Apple gain fails to offset rate worries 23 May 2016 | 3:22 pm

    Traders work on the floor of the NYSE(Reuters) - Wall Street ended lower on Monday as a bounce in Apple failed to offset concerns that the U.S. Federal Reserve could raise interest rates sooner than later.


The fastest and best way to sell real estate.
auction-style-property-sale