Wednesday, May 23, 2018

Bear markets simply don't start this way

Mid-week market update: There remains a fair amount of stock market skittishness among my readers and on my social media feed. Let me assure everyone that bear markets simply don`t start this way.

SentimenTrader has an intermediate to long-term sentiment model called AIM "which averages the momentum of the four major sentiment surveys". This model is not perfect at calling the exact bottoms or spotting exact turning points. Nevertheless, it has done a good job of defining the risk and reward of owning stocks when readings are at bearish extremes, which is contrarian bullish. The model is currently on a buy signal.

From a top-down macro perspective, Bespoke recently pointed out that the Philly Fed General Conditions Index hasn't been this high for some time. Despite the mutterings of permabears (I'm looking at you Rosie), recessions simply do not start this way.

BTW, the Philly Fed New Orders component surged to an all-time-high, and the last time it rose this much in a single month was October 2005.

These conditions are all pointing to further intermediate term equity strength. Expect a test of the old highs in the major equity indices this summer, and probably new all-time highs.

However, stock prices don't go up in a straight line. The short run equity outlook is a little different.

The full post can be found at our new site here.

We would further like to announce our Sale in May. The offer is available only to the first 100 to sign up. Please use this link to order.

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