Dangerous cocktail of indicators
News
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Posted 09/04/2014
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4524
They say Australia catches a cold if the US sneezes… The Dow Jones is currently at an all time high and with P/E ratios sitting at 26 where 28 is considered ‘bubble’ territory and 14 fair value; dividend yields are a very low sub 2%; the Relative Strength Index (RSI) is sitting above 70 being a clear ‘over bought’ indicator; the Volatility Index (VIX or “Fear Index”) is very low as it normally is before a bull crashes (and partly explaining gold’s current weakness), and we’ve shown earlier the S&P 500 is in the same territory above WMA’s as previous bubble tops. And to make this even more precarious it is supported by over $420 billion of margin loans – a record high. Seems like the US sharemarket is walking through a field of flowers in clouds of pepper. Do you have a golden hanky?