📈 Signals of a Correction?

Is the stock market correcting or crashing?

Equity Risk Premium

The first thing I want to look at is the Equity Risk Premium, which tells us the earnings yield on the S&P 500 minus the interest rate on 10-year Treasury notes.

When risk premium is high, this signals that stocks are more attractive vs. bonds (and vice versa).

We can see that not only is Equity Risk Premium dropping, but we are dropping below the zero line.

This tells us that the risk we would be taking on from buying the S&P 500 is not worth it compared to owning bonds.

Smart Money / Dumb Money Confidence

I look at this indicator often in my videos.

What we’re looking at here is the rate of change for retail and institutional buying. You can see that institutions are buying, but retail has been selling.

The only positive sign we saw here is that retail over the past day has not sold further, they just are not buying either. So we would hope that this could potentially be the end of selling from retail and that we could be forming a possible bottom.

For more signals I am looking at, watch this weekend’s video. It has a lot of data that will help you understand where we are at with the market right now: