Stocks go up in Bull Markets

JC Parets
October 25, 2022

Many stocks are no where near their all-time highs.

The S&P500 still needs to rally 25% just to get back to its former highs. And that's after the 10% rally that we've already seen in October.

The Nasdaq100 would need to go up another 43% from here just to get back to its highs. And again, that's after it already ripped 12% off its lows this month.

Remember, the average Nasdaq stock fell 44% from its highs during the bear market. The average small & micro cap stock dropped about 50%.

And since most stocks are so far from their highs, investors are having a hard time calling this a bull market.

"They need to make new all-time highs for it to be a bull market", they say to me.

So ok, let's play that game.

None of these prices here below were new all-time highs. So was this a bear market then?

What about this one?

No new all-time highs.

Was this a bear market too?

Investors have a funny way of ignoring what's right in front of them.

They would rather have a computer complicate their process instead of just going one by one and counting how many stocks are going up vs those going down.

They have all kinds silly "rules" that tell them what a bull market or a bear market is.

The worst offenders go around trying to convince people than an arbitrary 20% move off its lows is what defines a bull market.

Not 19.6%, to be sure, or 20.3%. Specifically 20. For absolutely no reason other than that's what someone said on the TV once.

For me, it's all so much simpler than that:

Should we be spending our time looking for stocks to buy? Or should we be spending more time looking for stocks to sell?

My answer has quite obviously been the former.

The weight of the evidence pointed to capitulation back in June, and consistent breadth improvement ever since.

Spending more time looking for stocks to buy has been paying off.

We're still looking for further confirmation of improving breadth, of course. Always.

See here: Bull Market Confirmation

But there certainly haven't been any signs of downside breadth expansion, or any evidence of a bear market at all for quite some time.

Let's see what the market gives us - further improvement, or brand new evidence of deterioration, completely out of no where.

So far, we've only seen improvement.

And keep in mind, this is also the best time to buy stocks of the entire 4 year cycle. This is all happening as we're about to enter the best 3-month period of the year Nov-Jan starting next week....

Some people like fighting trends.

I am not one of those people.

How are you feeling?

Is the market making you feel stupid? Good. It's supposed to. Get used to it.

That's why we like to keep an open mind around here.

All we know is that we don't know what the market is going to do next. But the good news is that no one else does either.

So keep your head down and keep working.

That's what I'm going to do.

Let me know what's on your mind.

- JC

 

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