Milton Berg, technical analysis legend and stock market expert, revisits the program to urge caution in the stock market. He discusses eight reasons why the bull market will end soon and highlights the weakness of banks. Berg also analyzes market gaps, put-call ratios, and the impact of Federal Reserve actions on the money supply. Additionally, he explores the influence of solar and lunar cycles on the stock market and discusses the value of his Twitter presence and upcoming book.
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Quick takeaways
Unusual market behavior with multiple upside and downside gaps suggests a lack of a healthy rally.
High buying of calls relative to puts and low put-call ratios raise concerns about overly bullish sentiment and potential market tops.
The current bull market exhibits characteristics of a bear market rally, lacking vigorous thrusts and low five-day rate of change compared to previous bull markets.
Unusual market statistics, such as gaps, put-call ratios, and five-day net upside volume, diverge from healthy bull market patterns, an important consideration for assessing market sustainability.
Deep dives
Unusual Market Behavior: Gaps and Put-Call Ratios
The podcast discusses some unusual market behavior, such as multiple upside gaps and downside gaps in the market, which is not typical of a healthy rally. It also mentions the high buying of calls relative to puts, indicating bullish sentiment. The podcast highlights that the put-call ratios have been at their lowest levels in the year, a phenomenon seen before market tops. Additionally, it notes that the five-day rate of change in the S&P 500 has been relatively low compared to previous bull markets, suggesting a lack of momentum.
Challenges to the Bull Market
The podcast raises several challenges to the bull market, including sentiment turning overly bullish and dismissing the possibility of a recession. It mentions the recent tightening of the Federal Reserve and the decline in gross domestic income in three of the past four quarters as concerning factors. The podcast also suggests that the banking index's weakness compared to other indices is a reason for concern. Lastly, it cites the proliferation of gaps in the market and the lack of an expected thrust in the rally as additional reasons to doubt the bull market's continuation.
Bear Market Rally Characteristics
The podcast points out that the current bull market has shown some characteristics of a bear market rally. It compares the current rally to bear market rallies in the past, noting similar phenomena such as gaps in the market and the buying of calls when sentiment is turning bullish. The podcast also highlights that the current bull market has not exhibited the vigorous thrusts and five-day rate of change typically seen in previous bull markets. Overall, it suggests that caution is warranted and raises doubts about the sustainability of the bull market.
Unusual Market Statistics and Indicators
The podcast discusses several unusual market statistics and indicators, including the historical behavior of gaps in the market, put-call ratios, and five-day net upside volume. It explains how these indicators have diverged from typical patterns seen in healthy bull markets, raising concerns about the current market environment. The podcast emphasizes the importance of considering these factors alongside other fundamental and technical indicators when assessing the health and sustainability of the bull market.
Bear market signals and caution
The podcast episode discusses various bear market signals and cautionary signs in the current market. The speaker emphasizes the potential end of a bear market rally and highlights indicators such as inverted yield curves, weak market breadth, and lagging markets like China and Hong Kong. The episode also mentions the importance of recognizing the subtle patterns and technical signals that often accompany market tops. The speaker suggests that although they are currently long on stocks, they expect to become bearish in the near future based on these signals.
Cyclical analysis and market patterns
The podcast episode highlights the significance of cyclical analysis in understanding market movements. The speaker explains the use of cycle-based indicators and mentions specific cycle dates to watch in the coming months. It is emphasized that these cycle-based signals are not long-term buy signals but indicate shorter-term rallies before potential market tops. The speaker also discusses historical patterns observed at market peaks and the importance of monitoring market internals and divergences.
Asset classes and outlook
The podcast episode touches upon the speaker's outlook on various asset classes. While they express caution about the market as a whole, they mention being bullish on the banking index based on technical analysis. However, they also note that in the current environment, there is uncertainty and lack of confidence in picking long-term bullish assets. The speaker suggests that it is crucial to remain focused on the market's signals and be prepared for potential declines within a deflationary environment.
When quiet legend of technical analysis Milton Berg first appeared on Forward Guidance in January 2023, he predicted a scorching stock bull market. Now that his call has aged very well, he returns to the program urging caution. Although his model portfolio is 100% long based on short-term indicators, he expects that any move higher will be temporary and that the bull market will end soon. Filmed on September 5, 2023.
(00:09) Reviewing Milton Berg's Successful Bullish Call in January 2023
(07:23) Market Outlook Now
(20:00) "This Market Is In A Lot Of Trouble
(22:16) Eight Reasons To Doubt That This Bull Market Will Continue
(28:05) Banking Index Often Bottoms Before General Stock Market Bull Move
(30:14) High Interest Rates Are A Deflationary Force
(36:26) Stock Market Not As Healthy As It Seems
(56:16) Market Cycle Dates
(01:05:54) Milton Berg No Longer Bullish On China
(01:08:17) Anticipating the End Of This Rally
(01:18:35) Bullish Call On Bank Index
(01:24:13) Stocks Will Likely Decline Below Low Of October 2022, Argues Berg
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Disclaimer: Nothing discussed on Forward Guidance should be considered as investment advice. Please always do your own research & speak to a financial advisor before thinking about, thinking about putting your money into these crazy markets.
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