What happened last week.
What we're watching for next week.
The market has taken a hit lately. Should we be worried? A look at the data might help.
Chart of the Week - The Treasury Yield Curve
The Treasury yield curve has inverted again. This indicator has a nearly perfect record of foreshadowing the onset of a recession. It's too early to tell when the next recession will arrive, but astute investors are raising cash to get ahead of it.
Chart 2. S&P periodic returns.
The market is losing a little steam. No call to action yet but pay attention.
Look at the numbers and get your house in order.
The year-to-date gain has dropped from 17.5% to 14.1%. No big deal but worth watching.
The market is only up 5.1% from 12 months ago. That's down from 17.5% recently.
Chart 3. The Fear-Greed Index
The above chart shows that investors are fearful. Marketwatch reported that the most wealthy investors now have the highest cash allocation since 2008.
Chart 4. The Red Zone
In football the red zone is the 20 yard line. Coaches adapt their strategy when their team enters the red zone. Defenses stiffen and offenses become more aggressive. In the stock market the red zone is 5% above the year-ago price.
History shows that once we penetrate the red zone its very likely that we will drop 10% or more through the bottom of the zone. Don't say I didn't warn you.
Final Thoughts
The market is caught between a rock and a hard place. Optimists are counting on a grand resolution to the China trade negotiations. The pessimists are counting on the arrival of a new global recession.
As always, I'm agnostic about the politics at play. I'm a numbers guy and my numbers are calling for caution but not panic. Just make sure you have an exit strategy in place before this magnificent bull market finally rolls over.
If you want more info about how to set up a solid Plan B, send me a message at info@zeninvestor.org
For a full analysis of the probability of a bear market or a new recession, see my Monthly Intelligence Report.
As always, if you like what you see, or have suggestions for improving this recap, leave a comment below, or email me at info@zeninvestor.org