This indicator spells trouble for stocks
The blue line is the graph of the stock market. The red line is a proprietary financial risk indicator (FR). It is one of the several gauges we follow in The Peter Dag Portfolio to asses financial risk. Click on the chart to enlarge it.
FR was stable until the end of 2014 and the mode of the market was bullish.
FR started rising in 2015 and the market eventually crashed in August of that year.
FR stabilized and the equity market established a base and then rallied until November 2015.
FR resumed its rise toward the end of 2015 and stock crashed again in January 2016.
FR stabilized in mid January and the market soared again. It is still very strong thanks to the ECB aggressive easing.
The problem is FR has been rising since February 10. Will history repeat itself?
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George Dagnino, PhD
Editor, The Peter Dag Portfolio
Author, Profiting in Bull and Bear Markets
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