The Bears Should Blame Tina
If you ever turned the television on this year or watched a market-related video online in 2019, you would have thought the bears had it sewn up.
It was the end of the bull market, leading indicators were falling after a 10 year bull, debt was too high, manufacturing was falling apart, PMIs were dropping like flies around the world, earnings were falling, gold was rallying, cats and dogs living together. Mass hysteria.
It was more or less over according to the bears all over the media.
Despite that, the market continued to grind higher and make new all-time highs.
Now we have the market indices finding support at the top of the prior 1.5 year+ consolidation and showing signs of trending higher going forward as economic data starts to improve and that stubborn services index (the large majority of the US economy) continues to be strong.
Even the small cap indices are breaking out of a long consolidation and showing signs of leadership even during a bad earnings recession. On Friday, we got a very bullish November jobs report while the Fed is likely on hold for a year.
But the bears should blame Tina for this one.
No, not some famous Tina that appeared on Bloomberg or CNBC recently. I’m referring to the acronym TINA – which stands for There Is No (good) Alternative to stocks.
Earlier this year in our videos, we talked about how the dividend yield on the S&P 500 was actually higher than the ten-year treasury yield. When this occurred in the recent past, stocks went on a strong run.
This also makes sense because treasury yields are not likely to go much lower. This is not the late 1990’s when the ten-year averaged around 6% – giving a good alternative to stocks.
What is the likelihood of the ten-year going from yielding 1.85% to negative 2%?
Probably not going to happen. The bond bubble is reaching its theoretical limits.
Meanwhile, gold cannot even come close to the highs made eight years ago. Crypto? Good luck with that.
So this takes most investors back to the stock market. In a mature bull market, money flocks to big brands, large caps and dividend paying stocks which is what we have seen over the past couple years.
However, the phillips curve loving, “it has to end soon” crowd may soon embrace the following idea.
Just an idea so don’t get too worked up.
The bears really hate this one. Its the notion made famous by Greenspan back in the late 90’s. The notion that the fair value of stocks is about when the earnings yield matches the ten-year treasury yield.
The market peaked back then about the time the earnings yield dropped well below the ten-year yield. The earnings yield goes down when stock prices go up.
Right now, the earnings yield is about 4.3% on the S&P 500. Meanwhile, the ten-year yield is about 1.85%.
Yep, you read that right. Stocks would have to more than double from here just to match the ten-year yield. For the ten-year yield to exceed the S&P 500 earnings yield by 50%, the S&P 500 would have to more than triple.
When bull markets end, they usually end with ridiculous valuations for stocks. The market bus has to pass through “full value city”, round the corner and travel through crazy town before its over. At least, that is how long bull markets usually end.
Right now, we are starting to head towards full value city. Crazy town is off on the horizon. The trek from full value city to disneyland valuations can take years.
This is when the big money is made when trading historically. Trend following, IBD lovers, pajama-wearing futures traders, day traders getting a zero-commission boost. It can be a great time for traders.
Now we are not saying that the S&P 500 will likely triple in the next few years. When swing trading our strategies, the market conditions only have to be good enough for us to make great profits.
But its already a great time for those trading the hottest industries and the strongest technical patterns. In our next video, I’ll be going over one of our biggest scores last month on ARWR.
We will take a look at our strongest technical pattern we trade and the different entry and exit strategies used on this stock, ARWR, that broke out of the pattern and then soared 40%+ in just a few days.
Keep in mind that 4% per trade, averaging winners and losers, can take a very small account and turn it into a very large account in just 100 trades if you roll over the profits into the next trade. Just pull up a compound interest calculator to see for yourself.
The only shot for doing this that we know of, however, is patiently waiting and trading just the very best opportunities. The best high tight flag breakouts often provide those opportunities in a bull market.
Look for the new video in the alert service soon. In it, we will also look at other high tight flags setting up. Stocks that can give us a shot at seriously building our trading account quickly.