Markets rebound but still “going into a bear market”

Markets were mostly higher on Tuesday.

The S&P 500 surged 1.6 percent and the Nikkei 225 jumped 1.4 percent while the STOXX Europe 600 was flat.

Stocks may not be out of the woods though.

“We are seeing an oversold technical rally before we head even lower,” said Sam Stovall, chief investment strategist at CFRA.

“Unfortunately, I don’t foresee this volatility easing too much over the next few weeks,” said Kristina Hooper, chief global market strategist at Invesco.

“Honestly, I don’t see the low being put in yet and I think we’re going to go into a bear market,” prominent market technician Ralph Acampora told MarketWatch.

In contrast, Hayes Martin, president of advisory firm Market Extremes, said that there is “a tremendous surge in pessimism” and sees “a powerful trading bounce” soon.

US stocks reverse gains, “breakdown still intact”

Markets were mixed on Monday.

The STOXX Europe 600 rose 0.9 perccent but the S&P 500 reversed early gains to close 0.7 percent lower. Asian stocks were mostly lower, with the Shanghai Composite in particular plunging 2.2 percent.

A report that President Donald Trump’s administration is prepared to announce tariffs on remaining Chinese imports if talks next month between Trump and Xi Jinping do not yield results renewed concerns over the US-China trade war.

Many analysts see further declines ahead.

Jesse Colombo, economic analyst and registered investment adviser at Clarity Financial, said: “Last week’s important technical breakdown is still intact.”

Stephen Auth, chief investment officer at Federated, said “it’s hard to see a sustained rally for the next few weeks”.

However, some analysts see a renewal of the stock market rally after the near-term decline.

Tony Dwyer, equity analyst at Canaccord Genuity, said that “our positive fundamental thesis...remains in place”.

However, Dwyer does not expect a V-shaped recovery, noting that with no imminent catalyst to push stocks up, “the bottoming process is going to feel awful”.

Nearly half of S&P 500 in bear market

Last week, the S&P 500 fell 8.8 percent. That left it in negative territory for 2018.

CNBC reported on Friday that more than 43 percent of the S&P 500 stocks were in a bear market, having fallen at least 20 percent from 52-week highs.

The report cited Chantico Global CEO Gina Sanchez as saying that a flight to value stocks could be the best way to weather any more turbulence.

“Value has re-established itself finally as a leader in the market, and it's been a very long time since we've seen that, and I actually think that this run has some legs,” said Sanchez.

Not everyone agrees.

John Tobey wrote in Forbes: “This is a bear market.”

He said that “there are now doubts and uncertainties that are causing analysts and investors to rethink fundamental outlooks” and that “value investors and bargain hunters will not step in and buy just because a stock has fallen”.

Markets resume fall, recovery “will take some time”

Markets fell on Friday.

The S&P 500 plunged 1.7 percent, the STOXX Europe 600 fell 0.8 percent and the Nikkei 225 fell 0.4 percent.

Analysts at Singapore's OCBC Bank said in a morning note that “investors are likely to be still licking their wounds after the recent sell-off so any rebound is likely to be muted barring a fresh catalyst”.

A positive catalyst, however, appears elusive at the moment.

“All the macro issues, from higher interest rates to slowing growth in China are giving us a half-glass-empty situation regarding 2019 earnings,” said Alec Young, managing director of global markets research at FTSE Russell.

Still, some analysts remain undaunted.

“The market’s mood swings have been unsettling, but the underlying conditions that triggered the rout are unlikely to shatter the economic or earnings cycles. We think this will all sort out, but it will take some time,” said Kelly Bogdanova, vice president of portfolio advisory group at RBC Wealth Management.

Markets rebound as some see selling “overdone” but beware “rolling bear market”

Markets mostly rebounded on Thursday.

The S&P 500 rose 1.2 percent and the STOXX Europe 600 rose 0.5 percent.

Earlier, the Nikkei 225 plunged 3.7 percent following the US stock market's rout on Wednesday.

The European Central Bank left interest rates unchanged at its monetary policy meeting on Thursday and reaffirmed its plan to end its asset-buying programme in December provided data shows inflation remains on track to eventually meet its target.

Some analysts remain hopeful for further gains for stocks.

“From a valuation standpoint, the market is very affordable after Wednesday’s declines, and the economic fundamentals remain really solid,” said Randy Frederick, managing director of active trading and derivatives at Charles Schwab.

Tom Essaye, president of the Sevens Report, wrote in a note that “at this point the selling is overdone”.

Michael Brush wrote in his MarketWatch column that “it's too late” to sell.

“Recessions are what normally kill bull markets — and a recession is not likely for at least a year or more,” he said. “So the current sell-off gives you a chance to buy stocks at better valuations.”

Other analysts think the market is likely to be rocked by more waves of selling before reaching a bottom.

“We're a ways from a bounce,” said Peter Boockvar, chief investment strategist at Bleakley Advisory Group.

Indeed, Michael Wilson, Morgan Stanley’s chief US equity strategist, said that current conditions represent a “rolling bear market”. “Risk-reward remains unattractive for us,” he said.

S&P 500 plunge into red for year

US stocks fell sharply on Wednesday.

The S&P 500 plunged 3.1 percent, its sixth consecutive decline and leaving it in negative territory for 2018. The Dow Jones Industrial Average tumbled 2.4 percent and the Nasdaq Composite sank 4.4 percent.

Elsewhere, the STOXX Europe 600 fell 0.2 percent but the Nikkei 225 rose 0.6 percent.

According to Craig Johnson, chief market technician at Piper Jaffray, the US stock market could see more weakness ahead.

“I think it's going to be another 5 to 10 percent lower from here and it's probably going to take about 14 to 16 weeks to work out itself out,“ said Johnson.

“The market selloff has taken on a life of its own and selling is begetting more selling, but so far we haven’t seen a capitulation moment, so I’m taking a more cautious approach,” said Chris Zaccarelli, chief investment officer at Independent Advisor Alliance.

“I think profit growth has topped out and will definitively slow going forward, contributing to the next recession, likely early in the next decade,” Mark Zandi, chief economist at Moody’s Analytics.

However, some analysts remain optimistic.

“Good news in my mind is valuations have become much more attractive here with the S&P 500 trading at about 15 times next year’s estimates,” said Art Hogan, chief market strategist at B. Riley FBR Inc.

Markets fall amid signs of “cyclical top”

Markets fell on Tuesday.

The S&P 500 closed 0.6 percent lower despite trimming earlier sharp losses, its fifth consecutive decline.

The STOXX Europe 600 plunged 1.6 percent after the European Commission asked the Italian government to rework its budget.

Earlier in Asia, the Nikkei 225 plunged 2.7 percent while the Shanghai Composite sank 2.3 percent.

Caterpillar and 3M contributed to the early gloom in the US by providing disappointing earnings reports ahead of Tuesday's opening bell.

“It’s industrials like Caterpillar that struggle when you’re at a cyclical top,” said Mike O’Rourke, chief market strategist at JonesTrading.

Brad McMillan, chief investment officer at Commonwealth Financial Network, noted that “almost all the news we see every day is bad”, adding that the “surprise is not that markets are reacting; it is that markets did not react sooner and that they have not reacted harder”.

Similarly, Sam Stovall, the chief investment strategist at CFRA, said that there have been problems with stocks in all of the economically sensitive sectors and that analysts have been slow to react. “They've maintained their optimistic earnings forecasts.”

Jim Paulsen, chief investment strategist at Leuthold Group said that companies are reporting weakening sales and crimping margins. “If those are true then the numbers on 2019 earnings estimates are wrong.”

Paulsen added that if investors “suddenly see the valuation case going away, that certainly is concerning”.

China stocks soar but US correction may not be done yet

Markets were mostly lower on Monday.

The S&P 500 fell 0.4 percent and the STOXX Europe 600 fell 0.4 percent.

US and European investors largely ignored gains earlier in Asia. The Shanghai Composite soared 4.1 percent while the Nikkei 225 rose 0.4 percent.

In Europe, investors remained focused on Italy after Moody’s Investors Service downgraded Italy’s sovereign debt rating by one notch to Baa3 late on Friday.

In the US, Michael Wilson, an equity strategist at Morgan Stanley, warned in a report that the recent rebound “was a dead cat bounce”. He added: “We don’t think the correction is done yet”.

In contrast, JC O’Hara, chief market technician at MKM Partners, believes that the bulk of the selling is over. “A close above 2,825 will nullify the bear case,” he said.

However, even the usually-bullish Wharton School finance professor Jeremy Siegel has become less enthusiastic about stocks.

“There are challenges that we face now,” he told CNBC on Monday. “I'm looking flattish” for 2019.

US corporate results show “troubling signs” as global economic outlook downgraded

A MarketWatch article has noted “troubling signs” in the latest US corporate earnings reports.

While about three-quarters of the 140 companies that have reported third-quarter earnings beat Wall Street’s estimates for net profit, Bespoke Investment Group noted that “just 58% of companies have beaten revenue estimates, which would be the weakest reading seen in six quarters”.

“In aggregate, companies are reporting sales that are 0.5% above estimates, which is below the five-year average,” reported John Butters, senior earnings analyst at FactSet.

Meanwhile, Reuters polls of more than 500 economists taken this month has shown that the outlook for 18 of 44 economies polled have been downgraded. The outlook for 23 were unchanged while three were marginally upgraded.

“A U.S. Federal Reserve that is raising interest rates to prevent the U.S. economy from overheating is constraining the policy options of countries where financial conditions are tightening and trade tensions intensifying,” wrote Janet Henry, global chief economist at HSBC.

Neil Shearing, group chief economist at Capital Economics, said that the global trade war “would inflict lasting damage to growth and cause a permanent loss of output”.

“The dominant downside risk to the global outlook remains the Trump Administration’s attempt to rebalance trade with China through tariff policy,” said Jean-François Perrault, chief economist at Scotiabank.

US market flat, China surges but bull market may have “peaked”

Markets were mixed on Friday.

The S&P 500 was flat while the STOXX Europe 600 dipped 0.1 percent.

Earlier in Asia, the Nikkei 225 fell 0.6 percent but the Shanghai Composite surged 2.6 percent.

The rebound in the Chinese stock market came just a day after it hit a four-year low, when it closed 30 percent below its 52-week high.

The bearish trend in China does not bode well for the US stock market. According to a CNBC article, US stocks are more often weaker when the declines in Chinese stocks are large.

“Everyone accepts that earnings growth will slow next year and that interest rates are going to rise,” said Alec Young, managing director of global markets research at FTSE Russell. “I think there’s a chance that the bull market has peaked.”

Markets tumble but analysts look for year-end rally

Markets fell on Thursday.

The S&P 500 tumbled 1.4 percent and the STOXX Europe 600 fell 0.5 percent. Earlier in Asia, the Nikkei 225 fell 0.8 percent and the Shanghai Composite plunged 2.9 percent.

While many analysts see continued volatility ahead, some remain sanguine for the longer term.

Bruce Bittles, chief investment strategist at Baird, said that “so far this looks to be a correction that could carry further, setting up the possibility for a year-end rally later on”.

Ryan Detrick at LPL Research said: “Importantly, markets can be jittery ahead of major events like elections. Once the uncertainty is resolved in November, solid fundamentals and strong seasonals could take over for a nice year-end rally.”

Analysts at JP Morgan led by Dubravko Lakos-Bujas wrote in a note that an earnings-related pause in corporate stock buybacks is contributing to the stock market’s October selloff. “With the largest one-way buyer returning in size to the market post earnings, we expect liquidity to improve and equities to move higher,” they wrote.

Other analysts are less optimistic.

Steve Grasso, director of institutional sales at Stuart Frankel, said that if growth stocks continue to fall, “that's the end of the bull market right there”.

Rich Weiss, chief investment officer of multi-asset strategies at American Century Investments, said: “Cash is still in the running to be king, if not this year, certainly next.”

Stocks may see another sell-off but “bonds are the bubble”

Markets were mixed on Wednesday.

The Nikkei 225 jumped 1.3 percent following the surge in US stocks on Tuesday but later on Wednesday, the STOXX Europe 600 fell 0.4 percent and the S&P 500 closed little-changed.

Jeff Carbone, co-founder of asset management firm Cornerstone Wealth Group, said that “when you look at the fundamentals of the economy and the market, we expect the market to ultimately move upward”.

In the meantime, though, many analysts think that stocks could see another sell-off.

“This is the second decline of this year of 5 percent or more and two out of every time we had more than one decline in a year, the second decline was sharper than the first,” said Sam Stovall, chief investment officer at CFRA.

“I don't think we're going to hit any new highs this year, and I do expect a lot of turbulence,” said Kristina Hooper, chief global market strategist at Invesco.

However, Leon Cooperman, CEO of Omega Advisors, said that the US economy is, “if anything, too strong”, and that the “conditions that normally lead to a big decline just aren't present”.

“My world is cash and stocks. I think bonds are the bubble, not stocks,” Cooperman told CNBC.

Markets jump but “strongest gains behind us”

Markets rose sharply on Tuesday.

The S&P 500 soared 2.2 percent, the STOXX Europe 600 surged 1.6 percent and the Nikkei 225 jumped 1.2 percent.

Jim Smigiel, chief investment officer of absolute return strategies at SEI, said that “the strongest gains in equity markets are behind us” and that “chances of a surprise on the upside are lower than on the downside”.

Howard Gold wrote in MarketWatch that the recent sell-off is just another pullback or correction but warned that if it turns into a 10 percent decline, “this nearly decade-old bull market is really in trouble”.

Meanwhile, Urban Carmel, the writer behind the Fat Pitch blog and ex-president of UBS Securities in Asia, thinks that a “topping pattern” is under way for the S&P 500 and that the recent selloff has not entirely run its course.

However, Carmel also said that a bear market is “the least likely outcome”.

Markets mixed as pullback seen having further to go

Markets were mixed on Monday.

The S&P 500 fell 0.6 percent, the STOXX Europe 600 rose 0.1 percent and the Nikkei 225 plunged 1.9 percent.

While many analysts remain sanguine, some think that the current stock markett pullback has further to go.

“More time and downside tests may be needed for a firm market low,” said Stephen Suttmeier, a technical research analyst at Bank of America Merrill Lynch.

“We find it unlikely there will be a V bottom given the sharpness and breadth of the correction,” said Tony Dwyer, chief market strategist at Canaccord Genuity.

Michael Santoli at CNBC said that “the pain trade is to the downside — or, perhaps most diabolically, up first and then down harder”.

Santoli quoted Jeff deGraaf of Renaissance Macro Research as saying that “the playbook would be to see equities bounce further, challenge a new high (if not make one) before puking again”.

US stock market trend “likely to remain up”

The S&P 500 fell 4.1 percent last week, its worst weekly performances since March.

Despite the sharp sell-off, some analysts remain sanguine.

“Investors shouldn't panic,” said Christopher Smart, head of macroeconomic and geopolitical research at Barings. He said that the latest sell-off “has the feel of a temporary correction”.

Analysts at Amundi said that the “bear checklist is not yet flashing red”.

Shane Olivier, head of investment strategy at AMP Capital, said: “A US recession still looks a long way off and this in turn suggests that the trend in earnings and hence share markets is likely to remain up beyond the near term pull back.”

Ned Davis Research's chief US strategist Ed Clissold said that strong quarterly earnings and guidance should help support the market.

“We still think we can get a year-end rally once we get through this weakness here,” he said.

Other analysts agree that earnings will be key.

“There's a credible possibility the biggest cause of the near-term jitters is fear of where guidance goes in the fourth quarter,” said Art Hogan, chief market strategist at B. Riley FBR.

David Lefkowitz, senior Americas equity strategist at UBS Global Wealth Management's Chief Investment Office, said there could be a hit to earnings from the trade tariffs which could be causing a “higher-than-normal degree of uncertainty”.

However, he added: “If we do see a little bit of a normal decay in the earnings growth estimates, the market should be able to digest that.”

US stocks rebound as investors stick with equities

Markets were mixed on Friday.

The S&P 500 jumped 1.4 percent and the Nikkei 225 rose 0.5 percent but the STOXX Europe 600 fell 0.2 percent.

Michael Arone, chief investment strategist for State Street Global Advisors, said that the acceleration in the US stock market's gains towards the close “indicates that investors are confident about the economy.”

David Madden, market analyst at CMC Markets, said that “higher interest rates aren’t the end of the world” and are, in fact, “warranted when the economy is strong”.

Investors may be thinking the same. According to FactSet, equity-based exchange-traded funds have seen positive flows over the past week while fixed-income ETFs saw outflows.

Global markets plunge with investor sentiment as they face “perfect storm”

Markets fell on Thursday.

The S&P 500 tumbled 2.1 percent, the STOXX Europe 600 fell 2.0 percent and the Nikkei 225 plunged 3.9 percent.

“It is becoming clear that global equity markets are facing a perfect storm of headwinds such as rising U.S. bond yields, U.S.-China trade disputes, global growth concerns and prospects of higher U.S. interest rates,” said Lukman Otunuga, research analyst at FXTM.

Charlie Ripley, senior investment strategist for Allianz Investment Management, said that “we are witnessing the repercussions in the markets as the Fed takes the punch bowl away from the party”.

Markets are falling as individual investors grow bearish. The latest AAII survey showed that 30.6 percent of individual investors described themselves as bulls, down by a steep 15.1 percentage points from the previous week, while bearish investors rose by 10.3 percentage points to 35.5 percent.

Mark Yusko, founder and chief investment officer at Morgan Creek Capital, said that stocks would have to fall 40 to 50 percent to reach fair value.

“If interest rates keep normalizing, if liquidity keeps falling, if earnings go to where I think they are going to go, which is lower, I think we are going to have a meaningful correction,” he said.

However, Jim Paulsen, chief investment strategist at The Leuthold Group, is not convinced that this is the start of a bear market and suggested that “maybe in the not too much distant future it might be time to get aggressive again for one last run in this bull”.

Indeed, Jeffrey Hirsch, editor-in-chief of Stock Traders Almanac, noted that Octobers have also been a time of turnaround. “Midterm election years Octobers are downright stellar thanks to the major turnarounds," said Hirsch.

US stocks plunge as investors see no safety in bonds

Markets were mostly down on Wednesday.

The S&P 500 plunged 3.3 percent, falling for the fifth consecutive day, its longest losing streak since November 2016.

Elsewhere, the STOXX Europe 600 tumbled 1.6 percent but the Nikkei 225 rose 0.2 percent.

Despite the sharp fall in US stocks, some analysts remain sanguine.

Brad McMillan, chief investment officer at Commonwealth Financial Network, described the market’s decline as “normal volatility” and said stocks were “past due for a pullback”.

Terry Sandven, chief equity strategist at US Bank Wealth Management, said that “U.S. equity markets are becoming oversold and due for a rebound”.

However, other analysts noted that the sharp sell-off in stocks occurred even as investors have been selling US Treasuries, typically seen as a safe-haven.

“There's no flight to safety in bonds. That's a sea change,” said Peter Boockvar, chief investment officer at Bleakley Advisory Group.

Art Hogan, chief market strategist at B. Riley FBR, suggested that the “best way to be defensive now is to raise cash”.

Technical analysts also see worrisome signs.

“The selling is a result of selling the best performing stocks this year and it is difficult to time when that selling pressure will slow,” said JC O'Hara, chief market technician at MKM Partners.

“What's concerning is that we saw the index break below its January high with narrowing breadth and not getting a confirmation of the most recent high by several momentum gauges,” said Andrew Thrasher, portfolio manager at The Financial Enhancement Group and founder of Thrasher Analytics.

Markets mixed as higher interest rates expected

Markets were mixed on Tuesday.

The S&P 500 fell 0.1 percent but the STOXX Europe 600 rose 0.2 percent.

Earlier in Asia, the Nikkei 225 plunged 1.3 percent but the Shanghai Composite rose 0.2 percent.

While the International Monetary Fund has cut it growth forecast for the global economy, analysts mostly still see higher interest rates ahead.

“We continue to believe the curve should flatten as the Fed continues on their tightening path and see real money demand for the long-end offsetting higher supply,” Mark Cabana, a rates strategist at Bank of America Merrill Lynch, said in a report.

Mike Wilson, equity strategist at Morgan Stanley, said that the rise in interest rates would cap stock market gains and lead to intramarket rotations.

“With S&P 500 upside capped on a valuation basis, it's more likely that Value outperforms by going down less or simply not going down,” he wrote.

However, Bank of America Merrill Lynch equity strategists think that bonds will become more attractive than stocks only when the 10-year Treasury note yield reaches 5 percent.

Stocks plunge in China and Europe, broader US market “continues to deteriorate”

Markets fell on Monday.

The S&P 500 fell less than 0.1 percent but the STOXX Europe 600 tumbled 1.1 percent and the Shanghai Composite plunged 3.7 percent.

Chinese stocks fell despite the People's Bank of China cutting banks’ reserve-requirement ratios by one percentage-point.

The sell-off in China pushed down stocks in Europe that were already weighed down by concerns over a budget clash between Italy and the European Union.

While the US stock market was relatively steady, Bruce Bittles, chief investment strategist at Baird, noted: “The technical underpinnings of the equity markets argue on the side of caution. Despite new highs by the S&P 500 and Dow Industrials just a few days ago, the broad market continues to deteriorate.”

Some investors turning from US stock market to emerging markets

The S&P 500 fell 1 percent last week, its second consecutive weekly decline.

Investors may be becoming nervous about the US stock market.

Last week, John Hussman wrote that “investors are becoming increasingly selective...their psychology has subtly shifted away from speculation, and toward risk-aversion”.

As evidence, Hussman pointed out that “recently, the 2% advance of the S&P 500 Index beyond its late-January high has been accompanied by a sharp narrowing of participation and leadership across individual securities”.

Some investors may be looking for better returns elsewhere.

A report from Reuters said: “Portfolio managers from Harding Loevner, Federated Investors, and Wells Fargo are among those who have been adding emerging markets stocks to their portfolios in the face of the imposition of import tariffs by President Trump and rising interest rates in the U.S.”

“We’re finding opportunities because of the trade war,” said Chris Mack, a portfolio manager of the Harding Loevner Global Equity fund.

“People are slow to come around to the realization that the U.S. isn’t going to close its borders to all emerging markets,” said Brian Jacobsen, senior investment strategist at Wells Fargo Asset Management.

Markets fall as US employment rises less than expected

Markets fell on Friday.

The S&P 500 fell 0.6 percent, the STOXX Europe 600 fell 0.9 percent and the Nikkei 225 fell 0.8 percent.

The US employment report showed that the economy created 134,000 jobs in September, less than expected, but the unemployment rate fell to 3.7 percent.

“Wages are definitely trending higher,” said Peter Cardillo, chief market economist at Spartan Capital Securities.

“I do think that if wages keep heating up, that will give the Fed more ammunition to raise rates,” said Michael Matousek, the head trader at US Global Investors.

Markets fall, US stock market “dangerously overvalued”

Markets fell on Thursday.

The S&P 500 fell 0.8 percent, the STOXX Europe 600 fell 1.1 percent and the Nikkei 225 fell 0.6 percent.

“We’ve had really strong data and commentary from Fed officials, which is bullish for equities, but that comes with the side effect of having people think we should expect more inflation and interest-rate increases, which in turn is a negative for equities,” said Randy Frederick, vice president of trading and derivatives for Charles Schwab.

Still, Nikolaos Panigirtzoglou, a strategist at JPMorgan Chase, is maintaining his bullish view on equities. “We still recommend investors to be overall overweight equities vs bonds,” he said.

However, Hayes Martin, president of Market Extremes, thinks that the US stock market is headed for a decline in the range of 8 to 13 percent.

Meanwhile, James Berman, president and founder of JBGlobal.com LLC, thinks that the US stock market is now “dangerously overvalued” and that it is time to switch to emerging markets.

Markets mixed, oil hits four-year high

Markets were mixed on Wednesday.

The S&P 500 rose 0.1 percent and the STOXX Europe 600 rose 0.5 percent but the Nikkei 225 fell 0.7 percent.

The US 10-year Treasury yield rose 11 basis points to 3.166 percent while oil rose to the highest since late 2014.

“Risk appetite has picked up recently in part because of stronger economic data and also because of progress made on trade between the U.S. and its neighboring countries, Mexico and Canada,” said Charlie Ripley, senior investment strategist at Allianz Investment Management, in a note.

However, Jason Goepfert, president of Sundial Capital Research, noted that market breadth has been weak despite the rally.

“When we’ve seen these kinds of ‘split’ breadth conditions in the past, the risk/reward in stocks was unfavorable over the next 2-12 months,” Goepfert said.

US stock market getting bearish signals amid “bullish tailwinds”

The S&P 500 was flat on Tuesday.

Some technical indicators are pointing to further trouble ahead for US stocks.

One is that while the S&P 500 rose in September, small cap stocks fell, with the performance gap between the blue-chip index and the S&P Small Cap 600 in particular being unusually wide.

Jodie Gunzberg, managing director and head of US equities at S&P Dow Jones Indices, wrote that “there may be a bearish signal from the inability of small-caps to keep up with the large-cap momentum”.

Meanwhile, another indicator, investors' cash allocations, have dropped to “rock-bottom” levels, according to Callum Thomas, founder of research firm Topdown Charts.

“Basically where cash allocations are at this point is entirely consistent with the type of signs you see toward the end of a market cycle,” said Thomas.

In contrast, Jim Cramer at CNBC said that the US stock market may be getting a boost from “two hugely bullish tailwinds”: a cyclical boom in hiring and a widespread stock shortage resulting from mergers, acquisitions and corporate buybacks.

Markets rise as US win streak looks set to continue amid overvaluation

Markets rose on Monday.

The S&P 500 rose 0.4 percent, the STOXX Europe 600 rose 0.4 percent and the Nikkei 225 rose 0.5 percent.

Markets were boosted by news that the US and Canada had reached an agreement on Sunday night on revising the North American Free Trade Agreement.

Sue Chang at MarketWatch said that after a six-month win streak, the US stock market “can keep on rolling if the past is any indicator”.

She cited data from Bespoke Investment Group showing that when the S&P 500 has risen for six consecutive months between April and September, the stock market has gone on to notch strong gains for the rest of the year.

Still, Vitaliy N. Katsenelson, chief investment officer at Investment Management Associates, warned that the average stock is overvalued somewhere between tremendously and enormously.

US stock market rally continues as rest of the world falters

The S&P 500 finished flat on Friday, the last day of September, but that was enough for it to finish the month up 0.4 percent. It also completed a 7.2 percent gain for the third quarter.

Sam Stovall, chief investment strategist at CFRA, said that the average fourth-quarter gain for the S&P 500 since World War II has been 4.1 percent, but if the third quarter is positive then the fourth quarter has seen the index "up 3.8 percent on average, and the market rose 82 percent of the time".

In contrast to the US stock market, the rest of the world has done very badly, with some markets falling into bear territory.