Daily Outlook

2 Metrics Soar to Dot-Com Era Levels: 3 Reasons S&P 500 Is in Trouble

Two key stocks metrics have soared to levels unseen since the dot-com bubble in the 1990s. It raises the risk of an S&P 500 pullback, coming off a 55.7% rally since March 23.

The Buffett Indicator and the number of option bets predicting an S&P 500 upsurge rose to nearly 20-year highs. The confluence of the two indicators and the fading U.S. dollar puts pressure on the stock market.

The Buffett Indicator and the number of option bets predicting an S&P 500 upsurge rose to nearly 20-year highs. The confluence of the two indicators and the fading U.S. dollar puts pressure on the stock market.

The Falling Dollar Is a Cherry on Top
Following Federal Reserve Chair Jerome Powell’s much-anticipated inflation speech, the U.S. Dollar Index fell from 93.32 to 92.28.

The dollar has declined sharply since March due to a culmination of factors including soaring virus cases and lagging economic growth. In the second quarter, the U.S. economy saw its biggest-ever decline. Watch the video below.

From the monthly high in March, the DXY has declined by more than 10%. Historical data shows that a weak dollar tends to slow the stock market’s momentum. Given the S&P 500’s bubble-like rally, the declining dollar might raise the chances of a pullback.

2 Metrics Soar to Dot-Com Era Levels: 3 Reasons S&P 500 Is in Trouble, CCN, Aug 28

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