Global stock markets remain strong. The leading U.S. stock market indexes keep on moving near all-time highs. European stock market indexes refuse to go lower, and emerging stock markets touched multi-year highs very recently. Any sign of a stock bear market? Let’s revise our leading indicators in order to answer that question.
In the U.S. there is a potentially very important event taking place: health care stocks could be breaking out. The health care sector, represented by the XLV ETF, touched all-time highs right at a triple top level. This is major news more so because nobody in the financial media talks about it. The * really * important events in financial markets remain ‘hidden’ for 90% of investors. InvestingHaven’s research team, however, keeps on reporting on these important events.
The breakout in XLV will only be confirmed once it trades for 3 consecutive weeks above 75 points. Watch that level very closely. The fact that this former market leader would officially break out would be very supportive to stock markets.
A stock bear market could develop if the XLV is unable to break out from 75 points.
The uptrend in stock markets is confirmed by rising yields. As said before, 10-year Yields is a leading risk indicator to InvestingHaven’s proprietary methodology. It is still driving the primary market trend of 2017, say the dominant market trend.
Since the uptrend in 10-year Yields started, the U.S. dollar and yields seem to be strongly correlated. Both are expected to rise, and that combination could be bullish for stock markets.
Two indicators for a potential stock bear market
So far so good for stock market investors. However, if yields rise too fast too high they could break the back of the commodities complex which would be very bearish overall for all markets. And that is the bear that is out there, trying to fool the bulls during their party.
The transportation index will be the ultimate leading indicator which stock market investors are watching. It is now trading at major support. If support holds, the stock bull market will continue. However, if support gives away, you should watch the bear(s) closely.