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It is assumed you know:

  • stock / stock market fundamentals no longer matter — they haven’t for several years;
    • S&P500 price to revenue is near all time highs in 2017;
    • S&P500 cyclically adjusted P/E is at an extreme level, far above its long term mean (16.5) and only topped by the all-time high seen in year 2000 (before the market was virtually cut in half) and by 1929 (before the largest crash in U.S. history);
  • macroeconomic data on its own no longer matters;
  • stock/ stock market technicals on their own no longer matter;
    • most price-driven technical trading systems are being rendered useless courtesy of stop-hunting algorithms;
  • U.S. corporations have been issuing debt to then buy back their stock, resulting in the weakest corporate balance sheets in many years (this is Ponzi finance);
  • corporate debt to revenue and cash flow is at all time highs;
  • the ratio of average personal income to average house price is at all time highs, eclipsing 2006 –the initiation point for the last housing market collapse;
  • there is over $13T in negative yielding sovereign bonds (Q3 2016);
  • central banks are buying sovereign bonds, corporate bonds, and stocks (equity ETFs);
    • what happens when they have to sell these stocks?
    • what happens in 2017 when the BoJ begins to exit its equity position? It owns 60% of the Japanese equity ETF market.
  • global interest rates are at/near all-time lows –>> why is every central banker on the planet deeply scared — at the same time?
  • central banks have been reducing the scale of stock market crashes and preventing stock market crashes from happening. That’s right. The 57% drop in the S&P500 in 2007-09 would have been substantially larger had they not stopped it.

 

But you probably do not know:

  • immediately before every stock market crash / crash initiation since year 2000, the Greedometer algorithms have warned;
  • the cost of stopping all these crashes has been monetary policy ammunition and central bank credibility –these resources are finite;
  • the time between crash warnings has dropped according to this exponential decay curve. It is now at zero –>> if a warning is stopped by a major new central bank sugar bomb another crash warning immediately starts.

time between Greedometer sequences

  • The Fed did 4 surprise intrusions in 2017 (threatened to spike the punch bowl/do more QE if needed/do less QT). Each time it did so within 48 hours of the mini Greedometer sequence suggesting an S&P500 market drop would initiate within the next week.
  • The S&P500 and Dow futures crashed 7% in less than 2 hours during the evening of the Nov 8 2016 election –once it was announced Mr. Trump had won. The futures market was then shut off (“limit down” was triggered, so the market was shut off for a couple minutes). ┬áThen $Bs in central bank liquidity came to the rescue and began jamming futures back up –so that you saw nothing when you woke up on Nov 9th.

Screen Shot 2017-12-26 at 9.43.36 AM

 

In summary, the Greedometers provide a means of quantifying how perilous the current environment is to the S&P500 and the direction it will likely take in the coming weeks, months, and year. Market timing insight in these newsletters is intended to have a 1 week granularity.