Weekend Wall Street #44 - The Stock Market Indicator That's Been Correct for 67 Years
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Happy Sunday everyone and welcome back to Weekend Wall Street. The market consolidated and then ended the week with a short lived breakout to the upside with large moves in many growth names as well.
The market has continued higher, rampantly, for the last four weeks- most importantly closing 20% above market lows setting us into a new bull market. Here’s what history says will happen next.
In 67 years this indicator has not been wrong, and while history doesn’t repeat itself, a famous market saying tells us that it may rhyme. Over the next 12 months stocks have never been lower, and they haven’t been higher by a short amount either, usually up another 28.2% in the following 12 months!
Another data point here is interesting - if the S&P 500 trades at least 7% higher after the first 100 days of trading, all 26 times the S&P 500 closes the year with a positive return. 2023 will be the 27th time this happens.
This week was the Fed blackout period but there is a meeting this week which should move markets as well as the May CPI number. The central bank is expected to pause is tightening for the first time in a while and Bloomberg is reporting that the options market is showing the biggest bias towards call options vs. puts in 15 months.
Quincy Krosby, chief global strategist at LPL Financial states that “If we see more interest in small caps and financials, it will be a telling sign that investors are more comfortable about where the economy is headed.” Therefore I am especially keeping an eye on that sector.