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In January, Brad Lamensdorf (CEO of Lamensdorf Market Timing Report) noted seven charts to watch as historic indicators are showing that market expectations are extremely optimistic.

His latest report begins ominously - "Watch-out, indicators point to a break in the stock market" signaling investors to be almost 50% short...

As the indexes continue to produce a series of higher highs, subsurface conditions are painting an entirely different picture. The market capitalized indexes are dominated by names such as Amazon (AMZN), Microsoft (MSFT) and Johnson and Johnson (JNJ). The good performance of these large companies is masking the fact that many stocks, including REITS and those in the retail sector, have already entered bear market territory. This issue of LMTR focuses on market breadth, which has become exceedingly negative.

The cumulative 21-day advancing/declining volume indicator measures the internal dynamics of the market by monitoring up/down volume. We have highlighted the previous four peaks in order to emphasize the series of lower highs in the up/down volume gauge. This situation has occurred while the indexes have simultaneously hit higher highs; a classic negative divergence illustrating that large institutional sponsorship has not been following the indexes.

 

The Ned Davis Research proprietary supply/demand indicator is extremely useful for judging underlying buying and selling in the market. The demand gauge has begun to weaken, and it has failed to participate in the recent rally. At the same time the supply side component has started to rise along with the market, suggesting that there could be a trend change in buying and selling.

 

An alarming percentage of NYSE and Nasdaq stocks are hitting 52-week lows. Sentimentrader has created an excellent study that explores this phenomenon. The study analyzed the percent of NYSE and Nasdaq stocks at 52-week lows when the S&P 500 closes at a record high. Recently there were more than 340 securities that sank to 52-week lows, the second highest level going back as far as 1965. Similar spikes occurred in 1973 and 1999, both directly preceding significant corrections.

 

Over the last year fewer and fewer stocks have participated in the market rally. Sentimentrader has created a unique indicator that quantifies the narrowing of stocks participating in a rally. They went back to 1995 and analyzed closes on the Russell 2000 that were at three-year highs while less than 5% of the stocks were at 52-week highs, indicating sell signals. Arrows have been placed at areas on the chart to highlight such occurrences. There have been five sell signals over the last 20 years, and one of them is occurring now. The 1996 signal was followed by a year-long flat market. The 2000 and 2007 signals identified incredibly rough bear markets, and the 2015 signal coincided with a 20% Russell correction.

What will the result of the current sell signal be?

Lamensdorf concludes:

Serious market corrections do not occur out of the blue.

 

Indicators, such as the ones highlighted in this month’s report, help investors identify when corrections are long in the tooth and rallies are beginning to wane.

 

Presently the indicators are suggesting a top. We remain 50% short.

Comments

Xatos (not verified) Thu, 08/03/2017 - 18:10 Permalink

I hope Trump announces the end of ads and popup spam on ZH at his rally tonight. "How the hell does anyone enjoy using this site with all of these ads?" asked Trump. 

Tallest Skil Xatos (not verified) Thu, 08/03/2017 - 18:15 Permalink

"So I was on ZeroHedge the other day... Great site, let me tell you; always has the best stuff. But these ads? Look folks, these ads are popping up everywhere left and right; 'this one simple trick' and 'do you want to increase the size of your penis'... Believe me, folks, I don't need to see these ads. We can do better. ZeroHedge can do better."

In reply to by Xatos (not verified)

Twee Surgeon Xatos (not verified) Thu, 08/03/2017 - 18:45 Permalink

People generally switch to Firefox as their Web Browser of choice and Upload the Ad Block plus add on, Extension or Plug-In, It's completely free and not that difficult to do.I/We/ me and mine do not get Ad's and Most of the Internet is pretty much unusable if you do not Disable the Endless Barrage of inane advertising for stuff you have absolutely no interest in and many of which may be Security Threats to the Device you are using. A thousand corporations are trying to hack the devce and the service you paid for. Inform yourself.

In reply to by Xatos (not verified)

Ima anal sphincter Twee Surgeon Thu, 08/03/2017 - 23:37 Permalink

I've been using ABP on Firefox for some time now. No ads on ZH. Problem is....... I get one vote. Any additional votes lead to a script error. A page reload will allow for one more vote, but that's really a pain.I have the same issue on numerous devices. Windows or Linux. As stated above, using the phone for ZH is completely useless.This might have adverse affects for ZH though...... I visit less often. I'm sure others do also.

In reply to by Twee Surgeon

Games Without … Thu, 08/03/2017 - 18:16 Permalink

Stock market valuations stretched as far as central banker balance sheets, this market is a one trick pony. The only question that matters is how much longer before central banks stop propping markets up. If they continue printing dollars, euros, and yen, markets will continue to go up.

WTFUD Thu, 08/03/2017 - 18:25 Permalink

The Fed Res ( JPM, Goldman, Others ) Are the Market. They'll Support 'Chosenites' at the expense of the Rest that make up this Ponzi.

Germany's upset with Trump's/Congress's New Russian Sanctions (suck me son ) , however, is so Dependent/Intertwined with Central Bank H/Q ( Fed Rese, BIS, IMF ) that it'll be very difficult for them to say FUCK YOU Uncle Scam!

gmak Thu, 08/03/2017 - 18:29 Permalink

The best part will be that eventully they will get it right with a top call and then we'll have to listen to "I called it" for the next 5 years. Dumb blind squirrels and broken clocks.

dasein211 Thu, 08/03/2017 - 18:36 Permalink

OMFG after almost 10 years you guys haven't figured out that CB's are going to buy any and all dips, no assets will be allowed to collapse and that every government currency is fucked? THE ONLY WAY TO CHANGE THIS IS TO CHANGE WHAT MONEY IS!!

Manipuflation Thu, 08/03/2017 - 18:43 Permalink

Went the Benton County fair today for a while.  For the first time in 7 and half year that I lived here I rode public transportation because Mr's M already had the van down there because they have a booth.  I had the kids in tow.  It took forever but the kids liked it and so did I because we all went to the back of the bus and unlike the rest of the fucks who started playing with their phones I reached into my pocket and pulled out one of single serving friends of vodka and slammed it.  Daughter caught that and started laughing.  Eventually we got to the transit station which turns out to be a sidewalk.  I was expecting at least a tent or booth or something.  No.  I know that I live in Thrashville but I was expecting some sort of station.  At a least a billboard with schedules on it.  Oh hell no.  The buses were clean and nice and the drivers were good.  I am still confused about what that was.  Se we get the fair and then we go look at the livestock.  Much of the judging is done now and most of the animals are sold.  Guess who is buying the animals?  Banks are and they are paying $300 a goat.  I saw my first $150 chicken today bought by US bank.  Even more unnerving is the fact that there is less and less stock to look at.  They don't even judge by breed anymore because I went and watched a judging.  What the fuck happened to us?  The ribbons don't even say first place anymore and everyone gets one!  When I was a kid and showing that wasn't the way it was.  You either put up or shut up.  Nowadays there are a lot of empty stalls/cages.On the plus side, what young folks where there were sitting around talking to each other and I didn't see a single one of them with a cell phone.  It is pretty rare to see a bunch of young people sitting around and not using cell phones.Just my observations from today. 

Manipuflation FORD_FIESTA Thu, 08/03/2017 - 20:07 Permalink

I made the beer tent but only for two sixteens.  I stopped by the honey bee guys and bought MOAR honey.  You have to support those guys and I didn't see any banksters in there.  Sorry for the shitty editing on the last post but it is the Mr's birthday.  She just took a call so I have a moment.  Now I have to make "Fair Fries" because I was not going to pay six bucks for a fucking potato when I can make them at home.  We have to keep costs low here.  Tomorrow is the cribbage tournament.  I have a beer ticket left and 50 cents of credit on the Metro Bus.  

In reply to by FORD_FIESTA

Pop3y3too Thu, 08/03/2017 - 18:53 Permalink

So, if the CBs are now buying Everything doesn't it stand to reason that eventually they'll own Everything? Welcome to Earth, the human slave farm.

DaBard51 Thu, 08/03/2017 - 20:01 Permalink

But, no humans buy and sell, anymore....Indicators, still apply to algos, do they?  When nine hundred years old you become, look this good you wil not.

DaBard51 Thu, 08/03/2017 - 20:38 Permalink

Browsers:  Firefox with uBlock Origin.  Flawless.Brave browser is a good alternative.   When nine hundred years old you become, look this good you will not.