divergence (2)

Admin

The Bloomberg US Financial Conditions Index and the S&P 500 tend to move in pretty close unison. In March, however, they started to move apart in a manner similar to late last year, before the market took a nosedive. Once again, either financial conditions improve or the stock market corrects.

bloomberg financial conditions spx
Source: Bloomberg

Shown below we see a similar wide divergence when looking at credit spreads (inverted in red) compared to the S&P 500 (in black). When financial conditions are healthy, credit spreads narrow since investors require less compensation for the risk of holding non-government securities. As financial conditions deteriorate and default risks increase, credit spreads widen. The credit markets were confirming the message of the stock market up until mid-2014 and have continued to diverge ever since. Either credit spreads narrow or the stock market adjusts.

BBB spread spx
Source: FinancialSense

Read More, Comment and Share......

Admin

Doubts Begin Chipping Away At The Stock Market

GRET-web-master675.jpg?width=300In the stock market, until recently, just about any news was good news.

Company earnings stumbled? Investors shrugged them off, sending shares higher. Economic growth was disappointing? So what.

But now that is changing.

Consider the recent trading in Apple, the world’s most valuable public company and a certifiable stock market darling. Apple announced third-quarter results on July 21 that were “amazing,” according to Tim Cook, its chief executive. Revenue rose 33 percent over the same period last year, and earnings per share were up 45 percent.

But investors seized on the fact that demand for the iPhone and the company’s new smartwatch didn’t meet expectations. Apple’s shares have lost 11.3 percent since then.

“I thought the break in Apple was a pretty big deal,” said Bill Fleckenstein, a veteran money manager at Fleckenstein Capital in Seattle. “They made all the numbers, but units were light. Maybe that is a precursor to what the entire tape is going to show us.”

The reaction to C

Read More, Comment and Share......

We welcome you to post a blog entry, oped or share your daily reading with us as long as it is relevant to the topic of investing and not an attempt to sell a product, proprietary strategy, platform or other service. Please provide links to any research data and if re-posting other articles, give credit where credit is due providing a back link to the original site.

300 words minimum per post. You may also sort by category or search by topic. Don't forget to comment and please "share" via Facebook, Twitter and Google+. If you have any questions, please contact us.

FOLLOW STOCKBUZ

__________________

This is a member-supported site. Please donate when you can to help pay the rent. Thank you!

Stay Informed. Sign up for the FREE StockBuz eNewsletter

________________

Investing involves substantial risk. All content is subject to StockBuz disclaimer.

Create Income With Option Spreads

All content on StockBuz.net is subject to disclaimer and Terms of Service