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The Bull Thread

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

  1. bigbear0083

    bigbear0083 Content Manager
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    Big First Quarter Gains Undoubtedly Bullish
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    Well the big gains of Q1 are in the books and after the nastiness in Q4 it’s reassuring to see the “Sweet Spot” of the 4-Year Presidential Election Cycle returning to form and delivering solid gains. The Sweet Spot of the 4-Year Cycle runs from Q4 of the Midterm Election Year through Q2 of the Pre-Election Year for with an average gain of 21.1% for the S&P 500 over the 3-quarter span. The S&P 500 gained 13.1% in 2019 Q1, but it lost 14.0% in 2018 Q4 and is still down -2.7% for the Sweet Spot so far.

    But, nevertheless, this type of gain for the S&P 500 in Q1 is undoubtedly bullish. The S&P 500’s gain for 2019 Q1 is the 26th best quarterly gain for the index since 1930, 7thbest Q1 since 1949, largest Q1 gain since 1998 and the top quarterly gain since September 2009.

    As illustrated in the accompanying table the 44 prior times that the S&P 500 was positive in Q1 since 1949 resulted in 40 full-year gains and 4 losses for an average gain of 16.2% and gains for the remaining 9 months of the year 38 times out of 44 year with an average gain of 8.6%. The 18 years with Q1 gains between 5.5% and 13.9% are all followed by full-year gains with the only blemish in geopolitically charged 1956.

    The big black mark came from Black Monday 1987. 1956 was mired by the Hungarian Revolution and the Soviet invasion as well as the Suez Crisis, the Second Arab-Israeli War. 2011 was hindered by the international sovereign debt crisis, the U.S. debt-ceiling crisis and the resulting downgrade of U.S. credit rating. The dotcom bubble popped in the year 2000. Tepid growth and earnings declines created a mini bear in 2015 that bottomed in February 2016. And finally, the 1980-1982 double-dip recessions put U.S. stocks in abear market throughout 1981 that ended in August 1982.
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  2. bigbear0083

    bigbear0083 Content Manager
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    A Solid Encore to a Strong Quarter
    The first quarter returns for the S&P 500 were quite strong, but if you thought the market wouldn't have enough energy for a good encore, the first full week of Q2 proved otherwise. With gains on every trading day of the quarter's first week, the S&P 500 heads into Monday riding a seven-day winning streak and the first five-day winning streak to kick off a quarter since the beginning of 2018. Before that, though, you had to go all the way back to 2010 to find another quarter where the S&P 500 kicked off the quarter with a five-day winning streak.

    The table below shows every quarter in the post-WWII periods where the S&P 500 was up in the first five trading days of a quarter. For each period we show the date of the S&P 500's fifth trading day for that quarter, how long the winning streak was as of that date, and then how the S&P 500 performed over the following day, week, month, and quarter. While one would think that a strong 'first impression' for the quarter would lead to solid gains going forward, the results don't back that up. in the 26 prior periods shown, the S&P 500 actually saw an average decline of 0.12% on the sixth trading day of the quarter with gains less than half of the time. One week later, the S&P 500 saw an average gain of just 0.05% (median: 0.23%) with positive returns just under 58% of the time.

    Moving out three months, the S&P 500's average and median return are both over 1.3%, but here again, the S&P 500 was only up less than 60% of the time. That's hardly anything to get excited about, although the one silver lining is that more recently, the S&P 500's average return is considerably better. In the last thirty years, the S&P 500 has seen positive returns over the next three months in eight out of eleven periods for an average gain of 3.2%.

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  3. bigbear0083

    bigbear0083 Content Manager
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    The December Low Indicator Has Bulls Smiling

    After the best first quarter for the S&P 500 Index since 1998, the big question is: What happens next?

    The December Low Indicator was created in the 1970s by Lucien Hooper, a former Forbes columnist and Wall Street analyst. Simply put, the indicator says that if the S&P 500 closes beneath the December low during the first quarter, it’s a warning sign for potential weakness over the balance of the year. The flipside is if it doesn’t, good times could be coming. Given the S&P 500 just went all of the first quarter without closing beneath the December 24 low, it’s worth taking a deeper dive.

    Sure enough, there appears to be some truth to this concept. “The December low indicator seems quite simple, but it has a tremendous track record,” explained LPL Senior Market Strategist Ryan Detrick. “When the S&P 500 stays above the December lows throughout the first quarter, the full year has been higher an incredible 34 out of the last 34 times, which bodes well for 2019.” In fact, this warning even worked last year, as it triggered in the first quarter of 2018 and eventually played out during the big fourth quarter sell-off.

    As our LPL Chart of the Day shows, when the S&P 500 stays above the December lows in the first quarter, the full year does quite well.

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  4. bigbear0083

    bigbear0083 Content Manager
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    Typical April Trading: Mid-Month Surge Stronger Second Half
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    Over the recent 21 years April is the top-ranked month for DJIA. April ranks #3 S&P 500, #5 for NASDAQ, #2 for Russell 1000 and #4 for Russell 2000. Average gains over the period range from a low of 1.19% by NASDAQ to a respectable 2.29% by DJIA. The first half of April used to outperform the second half, but since 1994 that has no longer been the case. In fact the second half of April is stronger over the recent 21-year period.

    Early April trading is usually positive for the first 4 days then flattens off until mid-month. Then the market tends to surge from the tenth to the fifteenth trading days. DJIA tends to close out the month strongest with NASDAQ closing weakest.

    Except for DJIA weighed down by Boeing (BA), stocks are having an above average month so far, which is quite typical in Pre-Election years where April has tended to be even stronger.
     
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  5. bigbear0083

    bigbear0083 Content Manager
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    April’s Option Expiration Week Historically Bullish: DJIA Up 30 of Last 37
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    April option expiration is generally bullish across the board with solid gains on the last day of the week, the entire week and the week after. Since 1982, DJIA and S&P 500 have both advanced 23 times in 37 years on expiration day with an average gain right around 0.15%. Expiration day used to be stronger, but four or five straight years of declines has taken on a toll on the longer-term record. Nonetheless, expiration week has a bullish track record over the past 37 years even factoring in recent weakness on the last day. Average weekly gains are 1% or better for S&P 500, DJIA and NASDAQ. The bullish bias of April expiration also persists during the week after. DJIA has posted a full-week gain in 15 of the last 20 weeks following expiration.
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  6. bigbear0083

    bigbear0083 Content Manager
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    Initial Jobless Claims Keeps Killing It
    Thu, Apr 18, 2019

    Just when you thought last week's Initial Jobless Claims couldn't get much better, this week's release smashed estimates once again! Seasonally adjusted initial claims came in at the lowest reading since September of 1969 at 192K, well below estimates of 205K. That is the third week in a row where claims have come in below forecasts by at least 10K. That is something that has only happened two other times in the past decade; once in 2009 and again in 2014. Whereas this is the second straight week of sub-200K readings, it is also the 80th straight week of readings at or below 250K (the second best streak on record) and 215th below 300K (a record streak). Continuing Claims are mirroring strong initial claims coming in at their strongest level since October of last year.

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    The four-week moving average has continued to fall coming in at 201.25K this week versus last week's 207.25K. Both this week and last were new 52-week lows and lows for the cycle. That is something we have not seen since last September when we saw four weeks of 52-week lows in a row beginning on August 31st. This week's number is also the lowest the moving average has been since 1969. Given these new lows, jobless claims data looks very strong and the prior highs seen earlier this year can more confidently be called a blip rather than a new trend.

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    Turning to the non-seasonally adjusted data, claims fell by just over 1K down to 195.4K. This decline was to a much smaller degree than previous years for the current week of the year but is still the lowest for the current week of the year since 1969.

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