Will the Market Behave Like 1962?
When the percentage of S&P 500 stocks trading above their short- and medium-term has cycled quickly from low to high, it never failed to lead to long-term gains over the next year.
Why we say that?
If we correlate the percentage of S&P 500 stocks above their10-, 50-, and 200-day moving averages of the 50 days since June low to every 50-day rally off of a one-year low since 1928, the rally off of the June 1926 bottom showed the highest value of a 0.83 correlation (from -1.0 to +1.0) between these two time periods.
That bottom carved out almost an exact replica in the percentage of member stocks above their 10-day moving average.
The same occurs for the percentage of member stocks above their 50-day moving average.
The difference occurs if we look at the 200-day moving average, but the overall pattern was similar for the current rally with many more member stocks holding above their 200-day moving average.
Now we look at the table below for the S&P 500's future return after the 50-day rallies from a one-year low in the past, with the highest correlation in members trading above their three moving averages. We saw a 24.8% gain 12 months later after June 1962. Only 2001 (twice) and 1931 saw a negative 12-month return, the other nine times all saw double-digit gains over the next 12 months.
Instead of looking at the S&P 500's members, we now turn our attention to the S&P 500 itself. The chart below shows the S&P 500's price return in the 50 days following the June low, compared to the 15 rebounds from a low that had a correlation of more than +0.55 (out of a scale from -1.00 to +1.00).
The black line, which shows the average of those rebounds, tended to peak a little later than we did this time, and our current pullback is more extensive than average. The initial shot off the low tends to run out of steam around day #50 and last through day #90.
The same goes for the ten most recent signals.
Overall, the S&P 500 generally performed well after 50-day rebounds as it mostly saw a positive 12-month return after such rallies from a one-year low in the past.
Source: Sentimentrader
Disclaimer: Investing involves risk and the potential to lose principal. Past performance does not guarantee future results. This is for information and illustrative purposes only. It should not be relied on as advice or recommendation.
Disclaimer: Moomoo Technologies Inc. is providing this content for information and educational use only.
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Silverbat : How nice to go back to 1950s, Chinese backed to bicycle time with blue dresses
71404971 : This is amazing, 3-4 million immigrants, 11 million job openings and a 3.5 unemployment
, makes zero sense
HereForTheTrades : Very good post, but you have to compare other market indicators. Interest rates, inflation, energy costs, etc.
placi 7 : $Apple (AAPL.US)$
Felonous Junkie 71404971: does when they make intelligent college grads and systematically destroy any semblance of the possibilities that come along in the already faded concept of the American dream
Felonous Junkie 71404971: it sure does when they make intelligent higher Ed. Grads or honest moral hardworking ppl and and systematically destroy any semblance of their rights as a us citizen and all the stolen the possibilities that come along in the already faded concept of the American dream
71404971 placi 7: Yeah, I’ve been here since the iphone8 and remember the day before and day of release it bounced about $20 per share. I’ve not had the pleasure of watching it reach 182 again and get back some lost funds. I’m getting ready to sit on the sidelines, because this is boring.