After busting through its previous support level of 1,200, the S&P 500 dropped to an intraday low of 1,100 in early August. As we pointed out in our last technical analysis update, longer-term charts show that stocks have significant support in the 1,100-1,150 range. That support level has been confirmed by the price action over the last six weeks. The S&P 500 has tested, let’s call it, 1,125 on four occasions over recent weeks. Each time, the market hit 1,125 it bounced higher. But the rallies have failed each time the index approached 1,225. Stocks have carved out a 100 point range … [Read more...]
A Historic Week
Even with the relatively calm day in the markets on Friday, this past week has been one of the most volatile on record. Only during the 2008 financial crisis, the 1987 stock market crash, and the Great Depression have stock prices been as volatile as they were this past week. … [Read more...]
Worst 5 Bear Markets
Developed world equity markets have been hammered in recent weeks. In U.S. dollar terms, many have entered bear market territory—defined as a peak-to-trough decline of at least 20%. We have compiled a slideshow of the 5 MSCI developed world stock market indices with the biggest bear market losses. If you are curious, the U.S. is one of the few MSCI developed country stock markets that has managed to avoid a peak-to-trough drop of 20%. … [Read more...]
S&P 500 Technical Analysis Update
The S&P 500 has now clearly carved out the head-and-shoulders top formation I wrote about in Young Research’s last two technical analysis updates. The price action in the market has a real weak look. Stocks blew threw their widely followed 200-day moving average and headed straight to their next support level near 1,200. The S&P 500 is down almost 8% in August alone. If the market can’t hold the 1,200-ish level, the index is likely headed to the 1,100 – 1,150 level where there is significant support. … [Read more...]
Rail Stock Divergence
The Association of American Railroads (AAR) put out its weekly rail traffic report today. For the week ending July 16, total carloads fell 0.3% compared to the same week last year. The AAR’s weekly rail traffic data is famously noisy. To get a better read on the underlying trend in rail traffic, it is useful to adjust the data. In the first chart below, you are looking at the year-to-year rate of change of the 13-week moving average in both total carloads and cyclical carloads. Both series have dipped into negative territory. The next chart shows the four-week moving average of total carloads … [Read more...]
S&P 500 Technical Analysis Update
Stocks are up big today on a blowout ADP employment report. Economists were looking for private sector job gains of 70,000 in June. The actual number came in at 157,000—more than double expectations. The strong ADP report comes on the back of better than expected manufacturing data last week. Two better than expected economic data points, and investors have thrown caution to the wind. In only 8 trading days, stocks have gained nearly 7%. From a technical analysis perspective, the S&P 500 looks strong. The index bounced powerfully off of its 200-day moving average and instead of running … [Read more...]
S&P 500 Technical Analysis Update
The S&P 500 is approaching a critical technical level. There is support for stocks around 1,255 on the S&P 500. The 1,255 level is also the 200-day moving average and the neckline of what appears to be the formation of a head-and-shoulders top. A decided break below 1,255 could signal further losses. If stocks catch a bid at 1,255 on the S&P, technical analysts will tell you that a rally back toward 1,340 is the most likely outcome. Stay tuned. … [Read more...]
Sell in May and Go Away
The following charts illustrate the irrefutable stock market power in the year before a presidential election. As you can see there is no other year quite like year three in the presidential election cycle in terms of consistent gains from stocks. The average return in year three is 16.9%, compared to 6.7%, -0.1%, and 5.9% in years 1,2,4 respectively. Year three also has the lowest standard deviation of the four. “In the first seven months of the third year since 1960, Year 3 has returned 2.5% per month for a total of 20% real (after inflation adjustment). In contrast, the … [Read more...]
A Compulsive Liar
Meet the stock market: he’s a valuable economic indicator, but he also has a tendency to lie—even compulsively. The stock market misdirects, misleads, and misinforms. The only time to rely on the stock market is when he is accompanied by his more honest older brother. The stock market’s older brother will let you know if his devious younger sibling is telling you the truth or feeding you a tall tale. Who is the stock market’s more trustworthy older brother? The bond market. The bond market keeps his younger brother in line. If the stock market signals that the economy is getting better by … [Read more...]
Dow in Dollars and Gold
This week the Dow Jones Industrial Average surged to 12,700, about where it was three years ago. You’re back to even, right? Not really. Over the same period Gold has risen 68%. It’s true the Dow in dollar terms is about the same over the last three years but when comparing it to the Dow in terms of gold — or real purchasing power — it’s another story. Based on this chart it would appear the Fed is a little late in protecting your dollar, wouldn’t you say? … [Read more...]
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