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2 days ago
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Why America's aging population will be a problem for stocks — and your retirement
One reliable indicator of investor behavior suggests that stock valuations in developed markets will peak in the next decade or so and then begin a long-term decline. The measurement for this prediction is demographics — in this case, the aging population of America and other developed markets. My daughter's boyfriend, a guest in my home, offered to powerwash part of my house — then demanded money What on Earth is going on with the American consumer? My father-in-law has dementia and is moving in with us. Can we invoice him for a caregiver? 20 stocks primed for rapid growth while trading at half of Nvidia's valuation Strategists forecast a sizzling summer for small-cap stocks Long-term demographic trends are of little concern if you are a short-term-focused investor. But demography becomes quite important if you're a decade or more from retirement and trying to devise an appropriate financial planning strategy for your nonworking years. Researchers have found that the ratio of a country's middle-aged population to its elderly is highly correlated with the long-term cycles of its stock market. This ratio — known among demographers as the 'M/O ratio' or 'middle-old ratio' — is plotted in the chart below. It is calculated by dividing the number of those 40-49 by the number of those 60-69. (The M/O ratio data in the chart are from Alejandra Grindal, chief economist at Ned Davis Research.) There is a distinct connection between the long-term trend shifts in the M/O ratio and the S&P 500 SPX. For example, the ratio hit a peak in 2000, coinciding with the end of the go-go years of the 1990s and the top of the internet bubble. The ratio then declined for more than a decade — a period coinciding with the global financial crisis and the 2008-09 bear market. The ratio has been in an uptrend since the mid-2010s. The correlation is not perfect. The M/O ratio didn't hit bottom until several years after the financial crisis, for example, by which point the stock market had already embarked on a new bull market. Furthermore, the ratio is of no help in predicting shorter-term bear markets, such as the one in 2022. Nevertheless, the M/O ratio's correlation with longer-term cycles is impressive, according to John Geanakoplos, an economics professor at Yale University and co-author of perhaps the topic's seminal academic paper, published in 2002. He found evidence that demography provides 'a single explanation' for the alternating 20-year periods of boom and bust since World War II. Notice that the focus of Geanakoplos' research is on the relative sizes of different population cohorts rather than the size of a country's entire population. That's important because many on Wall Street focus on overall population when making doomsday predictions about the future of the world. The chart also shows the path the M/O ratio will take through 2050, rising until the mid-2030s (though never getting to the level it did at the top of the internet bubble) and then declining through 2050. When interpreting this, Geanakoplos says it's important to focus on both the ratio's trend as well as its absolute level. He said in an email that the data suggest 'the demography effect [will be] slightly smaller going forward, but [with] stock market growth slowing in the early [20]30s.' You should plan accordingly in your retirement portfolio. Since the demographic projections aren't precise, this analysis suggests that over the coming decade, you would want to start reducing your equity exposure level to even lower levels than is suggested by the traditional glide path employed by target-date funds and financial planners. By the time you reach 65, for example, the glide path employed by Vanguard's target-date funds suggests that you should dedicate 30% of your retirement portfolio to U.S. equities. The dictates of demography would have you even less exposed to stocks at that time. The Vanguard glide path also calls for a 65-year-old investor to allocate an additional 20% to non-U.S. equities. Whether you maintain that allocation depends on the country and region of the world. The average non-U.S. country is also projected to have a lower M/O ratio in 25 years, according to the World Bank, though the decline between now and 2050 will be less than in the U.S. Many emerging market countries in Africa and Asia will have higher M/O ratios in 25 years, according to the World Bank's projections. So if you follow the demographic projections, you would want to shift some funds from U.S. equities and overweight emerging markets. Mark Hulbert is a regular contributor to MarketWatch. His Hulbert Ratings tracks investment newsletters that pay a flat fee to be audited. He can be reached at More: Americans are 'revenge saving' after years of splurging: 'Savings are a great way to have some certainty' Also read: What is a '996' work culture, and why are young professionals in China giving it the cold shoulder? 'You never know what might happen': How do I make sure my son-in-law doesn't get his hands on my daughter's inheritance? 'I am getting very frustrated': My mother's adviser has not returned my calls. He manages $1 million. Is this normal? My life partner is 18 years my senior. He wants to leave his $4.5 million fortune to me — not his two kids. Do we tell them? 'I'm afraid to ask her': My stepmother won't show me my father's will. What now? Jamie Dimon's bond-market warnings put investors on alert to diversify outside U.S. Error while retrieving data Sign in to access your portfolio Error while retrieving data Error while retrieving data Error while retrieving data Error while retrieving data
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2 days ago
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20 stocks primed for rapid growth while trading at half of Nvidia's valuation
When selecting investments, it is easy to get hung up on a particular metric, such as a dividend yield or a price ratio, but investors need to look deeper or they might miss opportunities. Inc. AMZN provides an example: Its stock has typically traded at a high price-to-earnings ratio. Investors tend to look at a stock's forward P/E ratio, which is the price divided by analysts' consensus estimate for earnings per share over the following 12 months. Over the past 10 years, Amazon's stock has traded at an average forward P/E of 79.5, while the S&P 500 SPX has traded at an average forward P/E of 18.7, according to FactSet. But Amazon's stock was up 855% for 10 years through Friday, while the S&P 500 returned 235% with dividends reinvested. My daughter's boyfriend, a guest in my home, offered to powerwash part of my house — then demanded money What on Earth is going on with the American consumer? My father-in-law has dementia and is moving in with us. Can we invoice him for a caregiver? 'The situation is extreme': I'm 65 and leaving my estate to only one grandchild. Can the others contest my will? 20 stocks primed for rapid growth while trading at half of Nvidia's valuation It turns out that for Amazon's management team, bottom-line earnings traditionally weren't a focus. The emphasis was on reinvesting most of the cash being generated to expand the business in multiple directions. So the Amazon story was about revenue growth, rather than EPS growth. And that brings us to Nvidia Corp. NVDA. Last week Laila Maidan looked into Nvidia's relatively high forward P/E and explained why the stock might still be considered a bargain for long-term investors, based on analysts' expectations for the company's revenue growth. Nvidia's stock traded at a forward P/E of 28.1 at Friday's close, while the S&P 500 traded at a weighted forward P/E of 21.4. It is not a surprise to see Nvidia trading at a P/E valuation that is 31% higher than that of the index. But based on consensus estimates among analysts polled by FactSet, Nvidia is expected to increase its sales per share at a compound annual growth rate of 41.7% through 2026, versus an expected sales-per-share CAGR of 5.5% for the S&P 500. All such estimates in this article are adjusted by FactSet to match calendar years; about 20% of companies in the S&P 500 have fiscal reporting periods that don't match the calendar. For Nvidia, investors pay a premium for the higher expected growth rate. And that sets the stage for a stock screen. Which companies trading at low P/E multiples are also expected to increase revenue quickly? For this screen we are looking at revenue growth projections — specifically sales per share. We are using the per-share numbers because they reflect expected dilution to a company's share count if it issues new shares to help fund an acquisition. Merging with a competitor will obviously make revenue increase. But if the share count rises significantly, sales per share will be lower. The per-share numbers help investors to understand whether or not a company might have overpaid for an acquisition. Starting with the S&P 500, we narrowed the list to companies trading at forward P/E ratios of 14 or less — half Nvidia's valuation. Actually, we rounded down, so the list was confined to stocks trading at a forward P/E of less than 14.5. Then we sorted the list by expected sales-per-share CAGR from calendar 2024 through 2026, based on consensus estimates among analysts polled by FactSet. Here are the 20 stocks in the S&P 500 with the highest expected sales-per-share CAGR through 2025 among those trading at a P/E of less than 14.5: Company Ticker Industry Forward P/E Expected sales-per-share CAGR from 2024 through 2026 Expand Energy Corp. EXE Integrated Oil 12.0 39.6% Super Micro Computer Inc. SMCI Computer Processing Hardware 14.1 31.9% EQT Corp. EQT Integrated Oil 13.6 26.0% Micron Technology Inc. MU Semiconductors 9.4 23.2% Coterra Energy Inc. CTRA Integrated Oil 8.3 21.2% First Solar Inc. FSLR Solar Power Equipment 8.7 20.5% Norwegian Cruise Line Holdings Ltd. NCLH Hotels/ Resorts/ Cruiselines 7.9 15.9% Incyte Corp. INCY Pharmaceuticals 10.7 15.5% Seagate Technology Holdings PLC STX Computer Peripherals 12.4 15.0% Gen Digital Inc. GEN Software 11.1 13.0% DaVita Inc. DVA Medical/ Nursing Services 11.6 12.0% Oneok Inc. OKE Oil & Gas Pipelines 14.2 11.8% Molina Healthcare Inc. MOH Managed Healthcare 11.7 11.8% Aptiv PLC APTV Electrical Products 9.0 10.9% UnitedHealth Group Inc. UNH Managed Healthcare 12.5 10.7% Elevance Health Inc. ELV Managed Healthcare 10.5 10.4% Dell Technologies Inc. Class C DELL Computer Processing Hardware 11.4 10.2% American International Group Inc. AIG Multi-Line Insurance 12.2 10.2% HCA Healthcare Inc. HCA Hospital/ Nursing Management 14.4 9.9% Ball Corp. BALL Containers/ Packaging 14.3 9.7% Source: FactSet You may need to scroll the table to see all of the data. It is a varied list. Super Micro Computer SMCI ranks second, with a 31.9% CAGR expected for sales per share through 2026. The stock soared last month after President Donald Trump announced investment agreements with Saudi Arabia to build data centers in the U.S., which lifted suppliers of related equipment. Read: Super Micro's stock keeps surging. Here's what might come next. It might surprise you to see UnitedHealth Group UNH on the list, in light of the company's numerous difficulties. These have included higher-than-expected costs in its Medicare Advantage business, reports of a government investigation into possible healthcare fraud and the departure of Chief Executive Andrew Witty. But with the stock having tumbled 40% this year through Friday, with dividends reinvested, analysts working for brokerage and research firms believe the worst is over, with 21 out of 29 analysts polled by FactSet rating UnitedHealth a buy or the equivalent. Only three of the analysts rate the stock a sell or the equivalent. Leaving the companies passing the screen in the same order, here is a summary of analysts' opinions about the stocks: Company Ticker Share buy ratings Share neutral ratings Share sell ratings May 30 price Consensus price target Implied 12-month upside potential Expand Energy Corp. EXE 90% 10% 0% $116.13 $128.45 11% Super Micro Computer Inc. SMCI 47% 41% 12% $40.02 $40.69 2% EQT Corp. EQT 72% 24% 4% $55.13 $60.63 10% Micron Technology Inc. MU 85% 12% 3% $94.46 $123.95 31% Coterra Energy Inc. CTRA 83% 17% 0% $24.31 $33.41 37% First Solar Inc. FSLR 78% 20% 2% $158.08 $202.43 28% Norwegian Cruise Line Holdings Ltd. NCLH 72% 28% 0% $17.65 $23.65 34% Incyte Corp. INCY 45% 52% 3% $65.06 $73.95 14% Seagate Technology Holdings PLC STX 59% 36% 5% $117.94 $119.88 2% Gen Digital Inc. GEN 45% 55% 0% $28.48 $31.83 12% DaVita Inc. DVA 9% 83% 8% $136.26 $167.14 23% ONEOK Inc. OKE 67% 33% 0% $80.84 $106.75 32% Molina Healthcare Inc. MOH 42% 47% 11% $305.04 $356.93 17% Aptiv PLC APTV 68% 23% 9% $66.81 $75.76 13% UnitedHealth Group Inc. UNH 73% 17% 10% $301.91 $376.05 25% Elevance Health Inc. ELV 75% 25% 0% $383.84 $491.94 28% Dell Technologies Inc. Class C DELL 81% 19% 0% $111.27 $136.52 23% American International Group Inc. AIG 55% 45% 0% $84.64 $90.88 7% HCA Healthcare Inc. HCA 59% 34% 7% $381.39 $387.95 2% Ball Corp. BALL 61% 33% 6% $53.58 $61.23 14% Source: FactSet Any stock screen has its limits and should only be used as a tool as part of your own research if you are selecting individual companies for investment. Click on the tickers for more about each company. Read: Tomi Kilgore's detailed guide to the information available on the MarketWatch quote page 'You never know what might happen': How do I make sure my son-in-law doesn't get his hands on my daughter's inheritance? Strategists forecast a sizzling summer for small-cap stocks 'I am getting very frustrated': My mother's adviser has not returned my calls. He manages $1 million. Is this normal? My life partner is 18 years my senior. He wants to leave his $4.5 million fortune to me — not his two kids. Do we tell them? 'I'm afraid to ask her': My stepmother won't show me my father's will. What now?
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3 days ago
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Here's how much higher gold prices can still go — even after doubling the past two years
I am reiterating my bullish view on gold. Gold staged an upside breakout through a cup-and-handle pattern at $2,100 in early 2024 and hasn't looked back. Moreover, it has staged upside relative breakouts against both the S&P 500 SPX and a 60%-stock/40%-bond portfolio, and it has stayed above the relative breakout levels even after its recent pullback. The technical pattern of multi-year bases and subsequent absolute and relative breakouts is highly reminiscent of the pattern experienced by gold at the start of the century, which took the yellow metal from its breakout at $500 in 2004 to significantly higher prices. 'He failed in his fiduciary duty': My brother liquidated our mother's 401(k) for her nursing home. He claimed the rest. What on Earth is going on with the American consumer? My daughter's boyfriend, a guest in my home, offered to powerwash part of my house — then demanded money My father-in-law has dementia and is moving in with us. Can we invoice him for a caregiver? 'The situation is extreme': I'm 65 and leaving my estate to only one grandchild. Can the others contest my will? For a longer-term perspective of the upside potential in gold, a point-and-figure chart of monthly gold prices, using a 5% box size and 3-box reversal, shows a measured objective of almost $7,000. I interpret this as an indication that gold's bull-run has several years to go before it reaches a final top. It's hard to estimate a precise time frame for the $7,000 upside potential for gold, as point-and-figure charts don't have time as a component. The best guess is three-to-five years. The 'sell America' investing trend has given gold GC00 a significant secular tailwind. U.S. President Donald Trump's pivot to an isolationist policy for America has shaken confidence in the status of American geopolitical leadership and the status of the U.S. dollar DXY. The long-term costs of these policies are the probable stall in U.S. productivity, and an increase in the cost of capital to U.S. companies through the removal of the USD's 'exorbitant privilege' as a reserve currency. Credit agency Moody's recent downgrade of U.S. debt to Aa1 from triple-A underlines a number of stress points that are rattling the bond and currency markets, as well as the loss of the dollar's 'exorbitant privilege'. Read: These 3 stock-market sectors can defy the growing 'sell America' trade Trump and the Republican-controlled Congress have been operating under the age-old assumption that deficits don't matter. I would say that deficits don't matter — until they do. Bond rating agencies, as well as the market, may be telling the U.S. Treasury that budgets are about to matter. Consider the budget proposals making their way through Congress. As is the case with virtually all budgetary math projections, the budget plan frontloads the benefits (tax cuts) and backloads the politically painful spending cuts. This will have a stimulative effect on the economy in the first two years, which is potentially equity-bullish, while risking bond and foreign currency tantrums. Here is why deficits may start to matter as Treasury supply-demand imbalances become evident. Economist Brad Setser at the Council on Foreign Relations documented how official demand for Treasurys has been general, bond inflows also have been declining. Setser rhetorically asked if the flows can return to the $1-trillion annual pace, which would sustain a 4% of U.S. GDP funding level, or stay at the $500 billion level. Setser concluded, 'I do think it is fair to note that increasing a 6.5% of GDP fiscal deficit into…waning foreign demand for coupons is a well, somewhat bold, move.' Jens Nordvig, the CEO of Exante Data, had an even more alarming observation. U.S. real yields are spiking even as economic growth expectations are falling. These are indications that the market is losing confidence in the U.S. and U.S. exceptionalism. Meanwhile, over at the U.S. Federal Reserve, policymakers have adopted a cautious approach to monetary policy. While falling inflation indicators would ordinarily warrant interest cuts in the near future, the uncertain effects of the new tariff regime on inflation has resulted in a go-slow and wait for the data approach to interest rate policy. As well, economist Robin Brooks highlighted a growing divergence between the bond market's inflation expectations in the U.S. and eurozone. While eurozone expectations have been largely flat, U.S. expectations are rising. This will lead to a divergence in monetary policy. The European Central Bank (and other central banks) will ease, while the U.S. Federal Reserve stays tight. The glass half-full interpretation is that interest-rate differentials should boost the value of the dollar, while the glass half-empty interpretation is a perceived economic growth differential between the U.S. and the rest of the world, which is bearish for the dollar and U.S. assets. In summary, this leaves U.S. fiscal and monetary policy in a difficult position as it's exposed to rising tail-risk. If fiscal policy is too easy, it risks a bond and foreign currency tantrum that leads to a drop in the dollar and rising bond yields. On the other hand, if fiscal or monetary policy is too tight, it risks a recession, which rapidly expands the deficit and the fiscal sustainability questions raised by Moody's and other rating agencies that downgraded U.S. debt. One proposed provision of the Trump administration's new tax bill, Section 899, increases the tax rate on countries that 'unfairly target and burden U.S. businesses and individuals operating abroad' based on the imposition of an 'unfair foreign tax', such as a tax on digital services and a global minimum tax. It raises the U.S. federal tax rate by 5% to 20% on tax residents of offending countries and has language that overrides existing tax treaties. The new rates would apply to passive U.S. source income such as dividends, interest, royalties and rents, as well as active U.S. operating income. At a minimum, an enacted Section 899 of the tax code would impose a tax on interest income such as Treasury and U.S. Agency paper on investment by entities tax domiciled in jurisdictions with 'unfair foreign taxes. This would include the EU, which is part of the global foreign tax regime agreed to in the past. Section 899 effectively deters foreigners from holding Treasury paper and reduces demand for U.S. government debt. Oops. That's one way of encouraging capital flight and depressing the dollar. What's bearish for dollar-based assets is bullish for gold. To the sell-America trade, add rising U.S. deficits, shaky bond markets, an increasingly hawkish Federal Reserve and policy uncertainty. Read: America just imported a mountain of gold. Here's why that should scare you. Gold's bull run will not end until investor psychology changes and the mom-and-pop investor piles in. Current retail demand is mainly driven by Asian investors, while U.S. and European investors are nowhere to be seen. As well, global family office allocations to gold and precious metals is just 2%. Market tops don't look like this. More: As Congress returns, here's where the Senate could make changes to the GOP's megabill Plus: Trump's playbook may be tossed, but higher tariffs are here to stay — one way or another 'You never know what might happen': How do I make sure my son-in-law doesn't get his hands on my daughter's inheritance? Jamie Dimon's bond-market warnings put investors on alert to diversify outside U.S. 'I'm not wildly wealthy, but I've done well': I'm 79 and have $3 million in assets. Should I set up 529 plans for my grandkids? My life partner is 18 years my senior. He wants to leave his $4.5 million fortune to me — not his two kids. Do we tell them? Why it'll be a sizzling summer for these underdog stocks
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27-05-2025
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Trump said he would delay European Union tariffs until July 9. U.S. stock futures and Europe equities are rallying.
U.S. stock futures and European equity markets climbed on Monday, after President Trump said he would delay the threat of 50% tariffs on the European Union until July to allow for negotiations. In a Truth Social post on Sunday, Trump said he agreed to postpone the trading bloc's tariff hike from June 1 to July 9, after a phone call with European Commission President Ursula von der Leyen, who requested the extension. Trump announced an increase in those tariffs on Friday, driving losses for U.S. and Europe markets, with the S&P 500 SPX dropping 0.6%. 'You never know what might happen': How do I make sure my son-in-law doesn't get his hands on my daughter's inheritance? Why Obama's former budget director is now sounding alarms about debt I'm hosting a Memorial Day barbecue. Would it be so bad to ask my guests to make financial contributions? 'Is this a good tax strategy or a sham transaction?' My mother wants to give me her home. I have a plan to avoid taxes. Treasury Secretary Bessent has a plan to bring down long-term yields. But will it work? U.S. financial markets are closed Monday for the Memorial Day holiday, but futures markets indicated a strong open for Tuesday. Dow Jones Industrial Average futures YM00 climbed 450 points, or 1%, to 42,124, S&P 500 futures ES00 rose 71.5 points, or 1.2%, to 5,888. Nasdaq-100 futures NQ00 jumped 297 points, or 1.4%, to 21,272. The Stoxx Europe 600 index XX:SXXP rose 1%, reversing Friday's 0.9% fall — the biggest one-day drop since April 9. The German DAX DX:DAX climbed 1.7% and the French CAC 40 index FR:PX1 1.1%, after Friday also marked the worst session for those indexes since April 9. The euro EURUSD was up 0.1% against the dollar at $1.1384 — the greenback was lower across the board — and the yield on the 10-year German bund BX:TMBMKDE-10Y rose 3 basis points to 2.602%. 'The E.U., taken as a bloc, is the U.S.' largest trading partner. And rising tensions between the U.S. and E.U. could easily spark a broader selloff in risk assets, drive the dollar and U.S. Treasuries lower, and send the euro, European bonds, and gold higher this week,' said Ipek Ozkardeskaya, senior analyst at Swissquote Bank, as she added the euro is drawing some haven bids. Strategists warn that new tariff threats from Trump could shake up a recent rally for equities and make for a turbulent summer. 'June is likely to be a turbulent month for the stock market, as the U.S. will be negotiating agreements with numerous partners worldwide to avoid reciprocal tariffs. Increased volatility is not out of the question if Trump intensifies pressure on other trading partners in a similar fashion,' Jochen Stanzl, chief market analyst at CMC Markets. The trading bloc had faced a 10% tariff following a 90-day pause on Trump's 'liberation day' tariffs, which he announced on April 2. Von der Leyen said in an X post late Sunday that she had had a 'good call' with Trump, but in order to 'reach a good deal, we would need the time until July 9.' Uncertainty over tariffs is weighing on U.S. businesses and want trade negotiations to settle so that they can 'move foward with their investment decisions,' Neel Kashkari, Minneapolis Fed President told Bloomberg TV in an interview on Monday. When asked if the Fed might make a move on interest rates, he said that the central bank will 'have to see what the data says, but we'll also have to see how the negotiations are going,' and if 'meaningful announcements' are struck in the next few months, that should 'provide a lot of the clarity we are looking for.' The CME FedWatch tool indicates traders leaning towards a 58% chance of a rate cut in September. European stocks have been drawing more attention from Wall Street and investors this year, with the Stoxx Europe 600 up 8.3% versus a 1.3% drop for the S&P 500. Citigroup analysts warned clients on Friday that if a 50% tariff on European goods holds, the index could see a 7% to 8% fall from current levels. Goldman Sachs economists led by Guillaume Jaisson said they are forecasting 0% growth for EU this year, and the new tariff threat from Trump would weigh heavily on growth. 'Flows into European equities have improved, but remain light overall. Recent months have seen renewed interest, especially from domestic investors. However, cumulative flows remain weak, and positioning by European investors is still relatively light,' said Jaisson and his team. My daughter's boyfriend, a guest in my home, offered to powerwash part of my house — then demanded money It's my dream to travel to Africa. Can I pay for my husband's trip without commingling our finances? Rising bond yields give stock-market investors the yips. Watch these levels. 'What we found horrified us': My elderly relative mistook charity envelopes for overdue bills — and gave thousands to other family members My ex-wife said she should have been compensated for working part time during our marriage. Do I owe her? Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
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24-05-2025
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The stock market is seeing more ‘90% days.' Here's what that means for your money.
It is significant that Wednesday's sharp decline in the S&P 500 SPX was a '90% down day.' In such a trading session, either declines were nine times the number of advances, or declining volume was nine times the advancing volume, or both. This is the fourth '90% day' for the U.S. market in the past month. Two have been 90% up days and two have been 90% down days. When the frequency of 90% days increases, that is not good for stocks. A large number of volatile days in the market is a bearish indicator. The chart below shows this data since 1998. My daughter's boyfriend, a guest in my home, offered to powerwash part of my house — then demanded money Trump threatens Apple with 25% tariff: Is now a good time to buy an iPhone? My ex-wife said she should have been compensated for working part time during our marriage. Do I owe her? This chart shows why investors should be worried about the latest bond-market selloff This hedge-fund manager has made about 50% in each of the last two years. Here's his home run trade. I don't have a specific indicator based on this data, but during the major financial crises, the number of 90% days in a 50-day period of trading days has reached 20 or more. Right now, the number of 90% days is trending higher, and that is a warning sign to at least continue to expect more volatility. If the number of such days begins to decline, then that would be positive for stocks. Meanwhile, the S&P 500 has continued to hold above 5,800, the area that had been an important resistance level for some time but is now the market's support level. That is positive, but there are some signs of potential trouble from the internal indicators. There is also support at 5,700 and at several levels below that. However, a move below 5,700 would revert the SPX chart back to a bearish status. As it stands now, though, the bulls are in charge. The upside target remains the all-time highs near 6,150. But there is a more negative development possibly taking place. SPX had been trading above its +4σ 'modified Bollinger band' (mBB) for several days. On May 21, it fell back below the +3σ band, and that creates a 'classic' mBB sell signal. We don't trade those, though, because there have been too many whipsaws from those signals. If SPX falls further, that would confirm a McMillan Volatility Band (MVB) sell signal. Specifically, if SPX trades at or below 5,795, the MVB sell signal will be in place. That level will not change going forward, but there is no guarantee that the sell signal will actually occur. Equity-only put-call ratios have continued to fall sharply, and this indicator remains strongly bullish as a result. These ratios would only turn bearish for stocks if they rise and begin to trend upward. Both are nearing the lower levels of their chart, which means they are getting into overbought territory, but that alone is not a sell signal. Market breadth had been strong during the rally but has begun to weaken over the past few days. A tentative sell signal is setting up. If breadth is negative again today, the breadth oscillators will have confirmed sell signals. That would be a significant change. In a related category, we also follow cumulative volume breadth (CVB). When CVB makes a new all-time high, SPX normally follows. This past week, CVB did indeed make a new all-time high — both in terms of 'stocks only' data and New York Stock Exchange data. That is a strong intermediate-term buy signal, and it is certainly worth taking a position based on it. New highs and new lows have been battling back and forth, but neither has exceeded 100 for two consecutive days. So the 'new highs versus new lows' signal remains in a neutral state. The indicators based on VIX VIX have also been in a neutral state. The last 'spike peak' buy signal reached fruition more than a week ago, and the trend of VIX sell signal was stopped out last week. It is now possible that a new trend of VIX sell signal will set up. If VIX closes above its 200-day moving average for two consecutive days, that would generate the sell signal. VIX did close above its 200-day MA yesterday, so another close there today would be enough. Currently that MA is at 19.80. The area is marked with a bracket on the lower right of the accompanying VIX chart. The construct of volatility derivatives is clinging to a bullish outlook for stocks. By that I mean that the term structures of both the VIX futures and of the Cboe volatility indices are sloping upwards, but just barely. If that should invert, it would be a large negative for stocks. So we are beginning to see the emergence of sell signals, but further confirmation is needed for most of them. Meanwhile, that CVB buy signal is reliable and augurs for SPX to eventually make a new high. It is possible that both could be correct: short-term sell signals and a longer-term bullish move. In any case, we will continue to trade confirmed signals and will continue to roll deeply in-the-money positions. As noted in the market commentary above, cumulative volume breadth has made a new all-time high (both in terms of 'stocks only' data and NYSE data). That normally means that SPX will follow along and do the same. There is not usually a long lag time for SPX to get to the new highs. The all-time high for SPX is 6,150 and for the SPDR S&P 500 ETF Trust (SPY) SPY it is 613. Buy 2 SPY (July 18) 613 calls in line with the market. If SPX trades down to 5,795 at any time, that will complete the necessary criteria for a McMillan Volatility Band sell signal. If SPX trades at 5,795, then Buy 1 SPY (July 18) at-the-money put and Sell 1 SPY (July 18) put with a striking price 50 points lower. Yes, the skew in the puts is so steep that this spread is 50 points wide. We will update targets and stops if this position is taken. If VIX closes above 20 on May 22, then VIX will have closed above its 200-day moving average for two consecutive days. That is a trend of VIX sell signal. If VIX closes above 20 for two consecutive days, then Buy 1 SPY (July 18) at-the-money put and Sell 1 SPY (July 18) put with a striking price 50 points lower. If this position is established, we will then hold it until VIX closes back below the 200-day moving average for two consecutive days. We are using a standard rolling procedure for our SPY spreads: In any vertical bull or bear spread, if the underlying hits the short strike, then roll the entire spread. That would be roll up in the case of a call bull spread or roll down in the case of a bear put spread. Stay in the same expiration and keep the distance between the strikes the same unless otherwise instructed. Also, for outright long options, roll if they become 8 points in-the-money. Long 2 APH (June 20) 80 calls: We will hold as long as the weighted put-call ratio for Amphenol APH remains on a buy signal. Roll up again at 90. Long 8 IEF IEF (June 6) 93.5 puts: We will hold this position as long as the weighted put-call ratio for Treasury notes remains on a sell signal. Long 1 TSEM (July 18) 42 call: The long calls were rolled up when Tower Semiconductor TSEM traded above $42 on May 14. Roll the calls up again at 50. Long 1 SPY (June 6) 587 call and short 1 SPY (June 6) 605 call: This the position based on the breadth oscillator buy signal. It has been rolled up at least twice. We will continue to hold without a stop, although we will update the status of the breadth oscillators in our weekly report. If they turn negative again, we will exit this position. Long 1 SPY (Jun 20) 591 call and short 1 SPY (June 20) 620 call: This the position based on the equity-only put-call ratio buy signals. It was rolled up when SPY traded at 591 on May 15. These buy signals are still in effect. We will update their status weekly. Long 2 DLR (June 20) 160 calls: We will hold as long as Digital Realty Trust's DLR weighted put-call ratio is on a buy signal. Long 5 CCL CCL (July 18) 20 calls: We will hold as long as Carnival Corp.'s weighted put-call ratio remains on a buy signal. Long 5 CZR CZR (June 20) 29 calls: We will hold as long as Caesar's Entertainment's weighted put-call ratio remains on a buy signal. Long 1 SPY (Sept. 19) 585 call and short 1 SPY (Sept. 19) 635 call: This is the position based on the differential between implied and historical volatility. Continue to hold. Long 3 IP (July 18) 50 calls: We will hold as long as the weighted put-call for International Paper IP ratio remains on a buy signal. Send questions to: lmcmillan@ Lawrence G. McMillan is president of McMillan Analysis, a registered investment and commodity trading adviser. McMillan may hold positions in securities recommended in this report, both personally and in client accounts. He is an experienced trader and money manager and is the author of 'Options as a Strategic Investment.' My husband and I spend more money on our daughter and her family than on my single son. Do we compensate him? My husband used my money to renovate his house. Will I now get half of his property in a divorce? I'm hosting a Memorial Day barbecue. Would it be so bad to ask my guests to make financial contributions? My brother's 'good daughter' siphoned $70,000 from her father's accounts. Should she still get an inheritance? I'm 57 and ready to retire next year on $7,500 a month, but my wife says no. Who's right?
