Tag: bullish signal

You've got 'your head in the sand' to be bearish in this market, as investors move to greed from fear, Morgan Stanley portfolio manager says
[ad_1]
Silver Bull and Bear on NewspaperGetty Images
- You’ve got “your head in the sand” if you’re bearish in this market, a Morgan Stanley portfolio manager said.
- Markets are moving from their fear stage to greed stage, Andrew Slimmon told CNBC.
- “If you look at history, it is an extraordinarily bullish signal for the market.”
After all the wild moves markets have made in the past couple of years, the S&P 500 is nearly back where it was at the start of 2021.

But stocks are poised for a breakout as investors recover from their whiplash and switch gears, according to Andrew Slimmon, senior portfolio manager at Morgan Stanley Investment Management, who pointed to improving breadth in market gains.

“If you look at history, it is an extraordinarily bullish signal for the market,” he told CNBC on Wednesday. “You have to have your head in the sand to really be bearish at this juncture. It means the market is breaking to the upside.”

The S&P 500 is less than 1% away from its all-time closing high after soaring 24% this year, as the US economy defied expectations for a recession while cooling inflation allowed the Federal Reserve to signal a pivot to rate cuts next year.

That marked a sharp turnaround from 2022, when the benchmark index tumbled 20% and sent investors into a defensive stance.

But market bulls are definitely outnumbering the bears right now as stocks look towards ending the year strong. The latest AAII survey showed that market optimism rose to its highest level over two and a half years at 52.9%, with bearish sentiment notching 20.9%.

“We came into this year with overwhelmingly negative consensus,” Slimmon said. “And so it’s entirely consistent with what we’ve seen in the past.

When stocks hit a low, investors begin selling, and as the tides shift, they jump back into the market to “play catch up,” he explained.

One way to see that playing out in stocks right now is how the equal-weighted S&P index has been lagging behind the cap-weighted index — which means that most stocks are still behind the Magnificent Seven stocks that account for most gains this year.

Meanwhile, others on Wall Street are so bullish that some have predicted stocks and the economy are poised for another “Roaring 20s” era.

Still, strategists at Morgan Stanley recently warned that the US economy could still be in for a surprise recession in 2024, though the Wall Street consensus has shifted to a soft landing.

Read the original article on Business Insider
[ad_2]

Source link
December 27, 2023
An 'extremely rare' stock market signal with a 100% accuracy rate is flashing and points to record highs in 2024
[ad_1]
Spencer Platt/Getty Images
- The stock market is likely to see record highs in early 2024 after an “extremely rare” signal just flashed.
- That’s according to Carson Group chief market strategist Ryan Detrick, who highlighted another sign that breadth is improving.
- “We continue to expect stocks to do quite well and we remain overweight equities,” Detrick said.
An “extremely rare” signal just flashed in the stock market, suggesting to Carson Group chief market strategist Ryan Detrick that record highs are imminent.

Detrick highlighted in a Thursday note that more than 60% of all components in the S&P 500 hit a new 20-day high last week. This runs counter to the idea that mega-cap tech companies are driving the bulk of the gains in the stock market.

“Last week, we saw a very rare breadth thrust, which suggested many stocks were surging, which tends to be a signal of impending strength,” Detrick said. “This is extremely rare and showed a lot of buying has taken place recently, not just in a few large stocks.”

Since 1972, this rare signal has flashed 15 times, not counting last week’s signal. The S&P 500 was higher a year later 100% of the time after the signal flashed, generating an average return of 18%.

If a similar gain occurs over the next year, the S&P 500 would trade at just above 5,400, which exceeds even the most bullish stock market forecasts.

Carson Group

Detrick highlighted that there have been other bullish signs in the stock market in recent weeks, including the S&P 500 surging 8.9% in November, representing its 18th best month ever.

When measuring the S&P 500’s 20 best months of performance, stocks were higher 80% of the time a year later, with an average gain of 13%. And when counting the 30 months in the S&P 500’s history when gains were at least 8%, stocks went on to rise 90% of the time in the following year.

“Once again, this signals the strength we just saw was likely the beginning to more strength, not the end,” Detrick said.

Finally, he noted that the S&P 500 hasn’t hit a record high since January 2, 2022, nearly two years ago. With stocks less than 5% away from new highs, Detrick said he expects a record high to be hit in early 2024, and if that happens, it would be one more bullish signal.

“Previous times stocks went at least one full year without new highs and then hit one, the future returns were very solid. In fact, stocks were up 13 out of 14 times a year later and up 14.9% on average after long streaks without a new high and then finally making one,” Detrick explained.

When combined with the “extremely rare” technical breadth thrust signal that flashed last week, all signs are pointing for a continued bull market in 2024.

“Any one of these signals by themselves could be argued to be random, but when you start stacking them all on top of each other, we continue to expect stocks to do quite well and we remain overweight equities,” he said.

Read the original article on Business Insider
[ad_2]

Source link
December 8, 2023
The stock market is following a rare pattern that could signal double-digit gains next year
[ad_1]
The stock market is following a rare trend only seen four times since 1926, Ned Davis Research said.monsitj/Getty Images
- The stock market is following a rare pattern that could signal big gains next year, NDR said.
- The S&P 500 rallied for five months straight this year, followed by three consecutive months of losses.
- In previous instances when that’s occurred, the index posted double-digit gains a year later.
A rare pattern of gains and losses in the S&P 500 is flashing a bullish signal that the benchmark index could be in for a double-digit rise in the year ahead, analysts from Ned Davis Research said in a note this week.

A five-month winning streak earlier this year was immediately followed by a three-month selloff from August through October. That’s an unusual pattern in the history of the market, one that has only been observe four times since 1926. Importantly for investors, it’s typically been followed by a period of strong gains in stocks over the next year, Ned Davis wrote on Wednesday.

In all instances of the S&P 500 posting at least five straight winning months before a three-month losing streak, the S&P 500 has gained a median 12% over the following six months, according to NDR data. And over the following 12 months, the index gained a median 21%.

The stock market’s current winning and losing streak most resemble the patterns seen in 1975 and 2016, strategists said. In those instances, stocks gained a respective 22.5% and 12.1% in the following six months.

“Over the past 50 years, the S&P 500 was up every time from one to 12 months later,” the strategists said. “From a bull/bear cycle standpoint, the early bull stages of 1975 and 2016 are the most akin to 2023, and their double-digit gains six months later are encouraging,” they added.

The current selloff in stocks, though, is lasting an unusually long time.

“At 39 market days, it is the longest in the study. The market has work to do to avoid being the first negative case.”

Stocks are up to start November but have wobbled for the past three months as investors adjust to the outlook for interest rates remaining high for longer. That’s sent bond yields soaring, with the yield on the 10-year US Treasury hitting a 16-year-high in October and helping to push the S&P 500 into correction territory last week.

Still, market commentators have made a bullish case for equities into 2024, as the economy remains robust and the Fed looks mostly done with its aggressive interest rate hikes to lower inflation. More dovish comments from Fed officials could cause stocks to rally into the end of the year, according to Fundstrat’s Tom Lee, who previously predicted the S&P 500 could retest its all-time-high by the end of 2023.

Read the original article on Business Insider
[ad_2]

Source link
November 2, 2023