Equity markets have turned negative again. This time, the signal is negative for the next week, probably (I say "probably" because the signal has not be confirmed, but appears to be about to) negative for the next one to two months, but over six months, positive. The correction is not likely to be large, as far as I can see from the JP Morgan Non Investment Grade Index. I use the triple screen theory to tell me where equity markets are headed. We should see markets heading down further in Sep 2010 to the tune of 10 - 20% before rebounding and hopefully breaking new highs.
I'm not very hopefully of US stocks in general. The western economy is in shambles. Their new normal is a deleveraged world where governments are spending far less, consumers more cautious, and energy costs pushing up inflation.
To some clients, investing is only about equities. They ignore that most of the liquidity went into bonds, preferred shares and convertible bonds. There were several issues that had fantastic yields at IPO. Upon trading, they shot up by 4 to 5%.
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