INDICATOR INSIGHTS
Monthly Update
CATEGORY
Market Sentiment/Risk MO. END % CHANGE LEVEL
Fear & Greed Index (Market sentiment) 46 +18 Neutral
VIX (S&P 500 Volatility measure) 16.4 -0.7 Neutral and increasing
MMRI (Risk measured by interest rates) 306 Even Extreme high risk
U.S. 10yr-bond yield 4.54 +0.1 Bearish
Fear & Greed Bitcoin 60 -10 Greed
CSI (Consumer Sentiment) 71.1 -9.6% Bearish
U.S. Economy UP/DOWN LEVEL
LEI (Overall leading indicators) Down Bearish
GDP (Gross Domestic Product) Down Bearish
ISM/PMI (Producers Manufacturing Index) Even Neutral
CPI (Consumer Price Index) Up Bearish
(Minus Food & Energy) Up Bearish
JOLTS (Unemployment categories) Increase Bearish
ADP (Jobs – non-farm payroll added) In-line Neutral
(Initial and continued claims) Up Bearish
Transports (Shipping, durable goods orders) Down Bearish
Real Estate (Housing starts) Down Bearish
(Total Construction Public/Private) Down Bearish
Mortgage demand Down Bearish
Personal Consumption/Retail Spending Down Bearish
Business Activity Down Bearish
*This section updated on January 31, 2025
**LTE = Lower than expected (bearish) / HTE = Higher than expected (bullish)
***We may not present the most recent numbers (often revised, and unreported in the mainstream media). Actual figures and charts can be found on the internet, including the FRED (Federal Reserve Economic Data) website.
Price Action UP/DOWN LEVEL
RSI (Relative Price Strength) Up Neutral
PCR (Put to Call Ratio – 5 day avg) Even Neutral
ADL (Advance/Decline line) Up Bullish
MFI (Money Flow Index) Even Bullish – Highly Volatile
Institutional Trading Down Slightly Slight Bearish
Commodities MO. END % CHANGE LEVEL
Gold to Silver Ratio 89.5 - 0.2 Slight silver bias
Crude Oil 72.88 +1.09 Slight increase
** Effective January 2025, we have now added another category revealing the 20, 50, and 200-day percentage of stocks reaching cycle highs for the Dow Jones Industrial Average (DJIA), S&P 500, Nasdaq Composite (QQQ) and Russell 2000 Small Cap Index (IWM), with periodic commentary.
Index Pct of Highs 20-Day 50-Day 200-Day Level
DJIA (Blue Chips) 87 60 63 Bullish
S&P 500 (Top 500) 69 51 55 Slightly Bullish
QQQ (Technology) 61 47 58 Neutral
IWM (Small Caps) 55 38 52 Slightly Bearish
As introduced in Chapter 3 of our publication When to Buy and When to Sell: Combining Easy Indicators, Charts, and Financial Astrology (available on Amazon), there are several “leading indicators” that go largely unnoticed and under-utilized by the average beginner or intermediate investor. Some of these indicators measure human emotion and market sentiment that often determines shorter term price action, while others uncover the true conditions of the economy, institutional buying and selling, and risk levels.
In our monthly “Indicator Insights” blog (first weekend of each month) we report the previous month-end levels (pertaining to the U.S. economy and/or the S&P 500) regarding several of these easy-to-read gauges we discuss, as well as others, to provide a quick-guide for our readers, with periodic analysis when necessary. Our monthly updates in this blog section include several market psychology related gauges, including the S&P 500 Fear & Greed index updated level, although there will be no commentary, as we dedicate an entire separate weekly blog to that indicator.
In the last edition, covering December of 2024, we noted a significant decrease in mortgage applications, and an increase in loan/rent defaults, putting pressure on the real estate sector. Significant job loss was also reported from major companies, while most hires were temporary or part-time. This month, the jobs market has moderated (though they often get revised) and defaults continue to increase.
“Readings of note” this month confirm the majority of economic indicators remain bearish almost across the board. Reports just a few days ago continue support weakness in housing, shipping orders, and business activity, higher personal debt and costs, as well as no sign of lower inflation. The fact that the Federal Reserve chairman reported this past Wednesday, that they are in “no hurry” to reduce rates, basically confirms the widespread belief that rates should not have been suddenly cut by .50 in the Fall. The argument that the cut was politically motivated is hard to argue.
The second is the continued fragmentation/distortion of the equities markets, that had been boosted in 2024, mainly by the large cap “mega” stocks, known as the Mag 7. These stocks, which include Amazon, Apple, Google/Alphabet, Tesla, Nvidia, Meta, and Microsoft, were holding up the market for quite a long time, despite the fact that very few others were making highs in the current cycle. In fact, only 22% of the S&P 500 stocks made new all-time highs in 2024. The ETF MAGS reflects these leading stocks, while the ETF RSP signifies the “equal weighted” S&P 500, which had been severely lagging. This month, these conditions have started to improve with a broader rally, however the market fragility is not over. As we can see in the Index Percentage of high’s chart, the Russell 2000 (IWM), which consists of small-cap stocks, that are highly interest rate sensitive, continue to lag. Historically, this index is strong in January, which was not the case this year with the ever so confusing Fed actions. The Dow Jones (DJIA) has led the recent broader rally as January ended the month up almost 1%, which is usually a good barometer for the remainder of the year.
As mentioned during the past few months, the markets also continue to be propped-up artificially, between signs of the government buying its own debt, military conflict spending, and interest rate/bond manipulation. GDP readings, however, also came in “lower than expected,” at 2.3 vs a consensus estimate of 2.6. Lower than expected seems to be the current term for “we were wrong” or in some cases “lied,” as it happens far too often within these weekly, monthly, and annual reports. Though there are several factors, if the overseas conflict activities decrease, the GDP could face a larger reduction. The wild daily price swings that returned in December, generally continued through January, and will likely continue for a while longer. Although the Advanced/Decline Line (ADL) and Money Flow Index (MFI) turned bullish, the latter suffered a large decrease just 10 days ago, before recovering. Traders should always be attentive to indicators like ATR and volume, as tight stop losses may be prematurely triggered with these temporary spikes or declines in price. Remember to keep your stop-loss orders mental (not in the system), and keep some cash aside to take advantage of lower asset prices in the future, in the event “panic” sets in due to uncertain global conditions.
***As always, this information is not intended to be financial advice, or any specific buy or sell recommendation, but rather a guide to assist the reader in some further understanding of current economic conditions.
