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Matt's Market Insights

Latest Articles

Correction Update

By Matthew Kerkhoff

 

Back in early February, in the midst of the most vicious selloff we’ve seen in years, I showed the chart below and made the case that we were seeing a “minor blow-off top in the context of a continuing primary bull market.” Today I’d like to update you on that view.

 

My February comments were based on two main factors: we had just experienced a two-month long explosive momentum-based rally, and the economy remained on steady footing. The combination of these factors left me with the impression that stocks would eventually work themselves higher, but it would take a while. I did not, however, expect it to take quite this long…

 

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Profits and Home Prices Remain Healthy

By Matthew Kerkhoff

 

China and the U.S. slapped $34 billion worth of levies on each other’s exports last Friday, and today the markets said, “yeah, whatever” and marched higher. The questions is, why?

 

Market moves often baffle investors, but this one shouldn’t. Fundamentals are strong, corporate profits appear to be rising nicely, the trade skirmish represents a tiny portion of overall GDP, and stocks have been punished for six-months straight. Add to that small incidentals such as the market’s P/E falling by about two handles, as well as these tariffs already being priced in, and you have the recipe for a nice rally.

 

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Charts Galore

By Matthew Kerkhoff

 

As someone who studies the markets on a daily basis, and writes about them frequently, sometimes I get tired of talking … or rather, writing. So today, I’m going to allow charts to do most of the talking, with some comments thrown in where needed.

 

As they say, a picture is worth a thousand words … so get ready for at least 12,000 words of wisdom, not including the nonsense that comes out of my mouth, of course.

 

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From Bullish to Neutral, Thanks Quants

By Matthew Kerkhoff

 

Dow Theory considers daily action in the stock market to be nothing more than noise, and that presupposition may be gaining in importance. I’ve been hanging on to the chart below, waiting for an opportune time to present it, and I think that time is now.

 

This chart, using data from Aite Group and Goldman Sachs, claims to show the share of trading that is done by algorithms. As you can see, the majority of equity market trades (around 65%) are executed by computers based on preset logic.

 

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How Long Until the Next Recession?

By Matthew Kerkhoff

 

Successfully predict the start of the next recession, plus or minus a few months, and you stand to make a lot of money. Not only can you reposition your portfolio towards bonds and cash – typically the best place to be during periods of economic malaise – you can also sell your stocks at or near the market’s peak.

 

In fact, if your primary objective is to invest in sync with the Primary Trend of the market, then predicting the onset of a recession is your most important task. This is because the primary trend of the market typically follows the economic business cycle.

 

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Hunky Dory

By Matthew Kerkhoff

 

That phrase doesn’t exactly describe the procession of events over the weekend at the G-7 meeting, but I think it’s a fair assessment of the state of the U.S. economy. Let’s take a look at some longer-term trends in economic data after we take inventory of the litany of events ahead of us this week.

 

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