I expect stocks to consolidate in an uptrend the Bull run off the 23 March lows then rally into the end of the year.
I have been tracking the Y’s 2009-2020 action since the March C-19 coronavirus chaos, and it looks uniquely the same. If I am right, we will see a consolidation of the run up from the 23 March low and a strong rally in the Fall to year’s end..
The picture since the end of March.
Since the low at 23 March, the S&P 500 is 37.1% higher. In Y 2009, the low came on 8 March and in the same 58 day frame, the benchmark index was up 39.4%.
So far in Y 2020, stocks have tried to break North 2X from the Y 2009 line, and faded.
On 12 April the Y 2020 rally got ahead of Y 2009 by 11 pts. Stocks then gave up all those gains in the next 5 trading days.
And last Monday the index was 13 pts ahead of the Y 2009 run, then on Thursday S&P 500 dove 5.9 closing the gap.
The likeness between the 2 frames are striking because valuations are higher, as the S&P 500 currently trades 19.6X recent peak earnings of 155/share compared with 10.4X peak earnings, in Y 2009.
The reason is because Big Tech now makes up a greater share of the index now at 32%, compared with 18.4% in Y 2009. The dominance of Big Tech in Y 2020 works to offset some unknowns,
And Big Energy represents a smaller share of the overall market at 3% Vs 12.4% back then.
And though financials led the Bull run higher in Y 2009, this Y 2020 rebound is broader-based. Plus, The Trump Administration’s fiscal and monetary stimulus/aid/relief have been richer by far.
As I see it lots of professional investors are overthinking this medical malpractice chaos. Because in fact it is not so different in the pattern, the Y 2009 is still Bullish with a Very Bullish bias.
Remember, in a Bull run, the Bull pauses to refresh always.
Notably, from day 58 of the beginning of the Y 2009 rally, the S&P 500 traded sideways go for 34 trading days, and then for the rest of the yr made up for it, with a 17% rally from late July through year end.
If history repeats itself that would put the S&P at 3,588 on 31 December, for an 11.1% gainer on the year, where it could get a bit toppy.
Tuesday, the major US stock market indexes finished at: DJIA +526.82 at 26290.00, NAS Comp +169.84 at 9895.88, S&P 500 +58.15 at 3124.61
Volume: Trade on the NYSE came in at 1.3-B/shares exchanged
HeffX-LTN’s overall technical outlook for the major US stock market indexes is Bullish with a Very Bullish bias in here.
- NAS Comp +10.3% YTD
- S&P 500 -3.3% YTD
- DJIA -7.9% YTD
- Russell 2000 -13.0% YTD
Looking Ahead: Investors will receive Housing Starts and Building Permits for May and the weekly MBA Mortgage Applications Index Wednesday.
Have a healthy day, Keep the Faith!
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