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The Bear Thread

Discussion in 'Stock Market Today' started by bigbear0083, Apr 1, 2016.

  1. bigbear0083

    bigbear0083 Content Manager
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    Strong Starts Hog Gains for the Year
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    Big gains the first four months of 2019 have some Wall Street pundits and analysts concerned. While strong starts for the market for the first four months of the year don’t leave much for the rest of the year, it is by no means a negative implication or bearish indication. S&P 500 leads the pack with its 17.5% gain coming in at #3 since 1950. NASDAQ’s 22.0% gain is the 5th best first four month since 1971. DJIA’s 14.0% rise is number 9.

    In the tables below we have displayed the top 20 first four month gains for the three major U.S. market indices with the subsequent changes for May, Rest of the Year, “Worst Six Months” May-October, 2nd half July-December and full year performance. While most of the full year gains are clearly logged in these big first-four-month gains, there still upside to be had in the latter part of the year.

    As you might expect May is weakest for DJIA and S&P and the Worst Six Months are hit hardest mostly after the strongest starts. The major blemish is course in 1987, with other critical givebacks in 1971and 2011. Other significant issues arose in 1975, 1983, 1986 and1998. Basically, if you take 1987 out of the equation the rest of the year after strong starts aint so bad. Average gains are about equal to historical average annual gains. Rest of the year gains sans 1987: DJIA 7.3%, S&P 500 8.7%, NASDAQ 12.6%.
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    Onepoint272 likes this.
  2. bigbear0083

    bigbear0083 Content Manager
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  3. bigbear0083

    bigbear0083 Content Manager
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    May Option Expiration Week: Recent Weakness
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    Trading around May option expiration is mostly a mixed bag. DJIA has been down nineteen of the last thirty-seven May expiration days with an average loss of 0.12%. The full-week has a bearish bias for DJIA and S&P 500 with records of 20 declines and 17 advances over the past 37 years. More recently, DJIA has suffered declines in eight of the past ten expiration weeks.
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  4. bigbear0083

    bigbear0083 Content Manager
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    Pullbacks Happen

    As we noted yesterday, the recent bout of volatility has caught many investors off guard. However, we’ve been saying since late March that some type of normal correction could happen, and we’ve taken a more cautious stance.

    This was one of the best starts to a year ever for equities, which historically has led to modest returns the next six months, with an above average chance of a large correction.

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    The S&P 500 Index fell nearly 5% before bouncing back yesterday. Here’s the catch: 5% pullbacks are actually perfectly normal parts of investing. “After a 25% bounce since the lows of December and a near 5% decline, it might feel scary and uncomfortable to investors, but it is important to remember that pullbacks are part of investing,” explained LPL Senior Market Strategist Ryan Detrick. “Trees don’t grow forever, and neither do bull runs. A break is usually needed before the eventual resumption of higher returns.”

    As our LPL Chart of the Day shows, there has been an average of more than three separate 5% declines for the S&P 500 per year going back to 1990. Given there hasn’t been a 5% pullback yet this year, we think the odds are quite strong that we see multiple 5% drops the rest of this year as the economic cycle ages and volatility picks up.

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  5. bigbear0083

    bigbear0083 Content Manager
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    Memorial Day Trading: Early Exit Dampens Market
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    In the Stock Trader’s Almanac we show how the market trades around Memorial Day. In the table below we went back to 1971, the year the Uniform Monday Holiday Act took effect, moving Memorial Day and most other federal holidays to Monday. In what used to be the “May/June Disaster area” the S&P was down 15 of 20 Mays from 1965 to 1984. Then May was the best month from 1985 to 1997. In recent years, the Friday before Memorial has become getaway day on The Street and volume is often diminished and trading uninspired. Average performance on each of the three trading days prior to the long weekend is rather lackluster for S&P 500 and NASDAQ. NASDAQ does have a higher frequency of gains during the three days, but average performance is still tepid.
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  6. bigbear0083

    bigbear0083 Content Manager
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    New Low For Bullish Sentiment
    Thu, May 23, 2019

    Trade headlines have continued to have a negative impact on stock prices, and in turn sentiment levels, over the past week. The AAII investor sentiment survey saw bullish sentiment decline sharply once again this week falling to 24.71% compared to 29.82% last week. To think that just two weeks ago bullish sentiment was at 43.12%, which was the highest reading of the year. Falling 18.41% from this recent high, the current decline is the largest two-week drop in bullish sentiment since 6/6/13 when it fell 19.5% over the two previous weeks.

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    But this is not necessarily all bad news from a contrarian perspective. As shown in the chart below, this week's reading of 24.71% is well below the historical average of 38.21%. In fact, it is over 1 standard deviation below it, something that can be considered a bit extreme and raising expectations for some type of mean reversion. When bullish sentiment reaches an extreme low by historical standards, forward equity market performance has typically been stronger than average. The last time survey respondents showed this little optimism was in late December of last year; right around the time of the market bottom.

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    Surprisingly, while there was this development in bullish sentiment, bearish sentiment actually fell to 36.08% versus 39.3% last week. So while still elevated from where it has been for much of this year as the market has rallied, bearish sentiment is not reaching new highs. It is also still above its historical average but not to an extreme degree.

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    Neutral sentiment took from the losses in the bullish and bearish camps as it rose to 39.22%. While this sounds high, there was actually a slightly higher reading at the beginning of the month and this brings the neutral reading off of its recent lows and more in line with what has been observed for most of this year.

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