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This should worry you

If you weren shaken or stirred by this month market unpleasantness, well, that might be a problem. Complacency in the market often gives way to terror, and by twomeasures with records stretching back to the Ulysses S.
Grant administration, complacency is
still too high.

Olivier Morin, AFP/Getty Images

The first measure: The number of up months in the market divided by the number of down months over a 60 month period. the last five years, upmonths have outpaced down months by about 2.5
to3 times.

The assumption: Consistency breeds complacency.

The second measure: Low volatility. The five year standard deviation of
the stock market has been extremely low. (Standard deviation is an
open ended measure of volatility.

Put the two together, and you get a very high complacency indicator, and that worrisome. It doesn mean the stock market is about to collapse, but it does mean that risk is high. Paulson remains
a worried bull. longer term outlook forthe stock market remains too favorable to move away from asecular
overweight, he writes. bonds remain overvalued andcash offers no yield. However,
we would not be surprised ifthe stock market continues to struggle in the intermediateterm. WaggonerArticles Connexes:

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