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Stock Market Scoop: Bull Market Regains Steam

In our Stock Market Scoop, we’ll analyze how the stock market has performed and give you our insight on where the trends may be headed. Let’s start with the big picture. In the big picture, the bull-bear indicator suggests that US equities are still in a cyclical bull market. In the graph below, you’ll see that the bull-bear indicator is well above the bear market threshold. The value of this indicator is 69.90 as of June 1, which is up from last month.  The markets finally had a good month in May.

In the Secular (years to decades) timeframe, the long-term valuation of the market is simply too high to sustain rip-roaring multi-year returns – but the market has entered the low end of the “mania” range, and all bets are off in a mania.  The only thing certain in a mania is that it will end badly…someday.  The Bull-Bear Indicator (months to years) is positive, indicating a potential uptrend in the longer timeframe.  In the intermediate timeframe, the Quarterly Trend Indicator (months to quarters) is negative for Q2, and the shorter (weeks to months) timeframe is positive.  Therefore, with two indicators positive and one negative, the U.S. equity markets are rated as Neutral.

May was a strong month for U.S. markets, with the Dow Jones Industrial Average adding 1.1% and the Nasdaq Composite surging 5.3%.  By market cap, the large cap S&P 500 added 2.2%, the mid cap S&P 400 rose 4.0%, and the small cap Russell 2000 vaulted 5.9%.  Canada’s TSX rose 2.9%, while in Europe the UK’s FTSE added 2.2%.  Major markets on Europe’s mainland finished the month lower with France’s CAC 40 down -2.2%, Germany’s DAX off -0.1%, and Italy’s Milan FTSE plunging -9.2%.  In Asia, China’s Shanghai Composite added 0.4% while Japan’s Nikkei retreated -1.2%.  For the month, developed markets retreated -1.9%, and emerging markets fell -2.6%.  Gold fell for a second consecutive month by slipping -1.6%, while silver managed a gain of 0.3%.  Crude oil finished the month down -2.1%, and copper finished May off -0.3%.

The upward trajectory of home prices showed no signs of slowing down, according to the latest reading from the S&P/Case-Shiller national home price index.  The Case-Shiller home price index rose a seasonally-adjusted 0.4% in March and was up 6.5% compared to the same time a year ago.  The more narrowly focused 20-city index was up a seasonally-adjusted 0.5% and was 6.8% higher than the same time last year.  Demand continues to be strong as supply is short and favorable economic conditions continue to make conditions in which bidders drive prices up.  Of note, year-over-year gains in the 20-city index have been up every month since last June.  In addition, the annual gain in the March report was the strongest since mid-2014.  Home prices in Seattle continued to lead the way with a 13% increase over a year ago, followed by Las Vegas at 12.4% and San Francisco at 11.3%.

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