- John Hussman says that indicators of a stock market peak are beyond dot-com bubble levels.
- Hussman wrote an unscheduled, “interim” note to investors because of the occurrence.
- He shared some of the “dozens” of bearish indicators he’s looking at.
It’s one thing when a single market indicator — even a few indicators — show weakness. It’s difficult to draw meaningful conclusions from small sets of numbers.
It’s another thing when “dozens” of indicators start to to deteriorate simultaneously.
That’s what started happening in November, according to John Hussman, president of the Hussman Investment Trust. The development prompted Hussman to write an “interim” note to investors — one outside of his normal commentaries.
“Across four decades of work in the financial markets, and over a century of historical data, I’ve never observed as many historical indications of a market peak occurring simultaneously,” Hussman wrote, calling the amount of deteriorating indicators the “mother lode.”
“Despite speculative highs in the S&P 500 and Nasdaq indices, our gauges of internals reflect persistent divergence here, with notable deterioration in recent weeks,” he continued. “The preponderance of warning flags we observe here are occurring in the context of the most extreme valuations in history, coupled with market internals that are already divergent.”
Below are a few indicators among the dozens turning sour. The first, indicated by the red bars, shows instances where the S&P 500 is at highs by a number of measures, but the number of stocks at 52-week highs and lows is significant, and less than three-quarters of stocks are above their 200-day moving averages.
Hussman Strategic Advisors
Next is a simple tally of technical indicators that tend to show up around market peaks. It’s currently beyond levels seen during the dot-com bubble.
“The red bars are actually presented on log scale because the tally is beyond anything we’ve ever observed. The previous record was March 27, 2000, the day after the tech bubble peaked.”
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