We never actually know that we’ve been in a bull market until well after the bottom.
It’s easy to look back and pinpoint the March 2020 low or the March 2009 low, for example, and say, “That’s when the bear market ended and a new bull market started”.
But in real time, when we’re going through that transition, how can we possibly know?
Well, classic signs of the end of the bear markets are things like historically bearish sentiment extremes and washout breadth levels.
We obviously had both of those as our sentiment readings this summer were the most pessimistic since the Great Financial Crisis, and only 14% of stocks on the NYSE were in uptrends (compared to almost 90% entering 2021).
Those are the things you see just before the market turns.
Now, what are the things you see just after a market turn, around the 2nd inning or so?
Momentum thrusts.
Relentless buying pressure coming off historic selling. And that’s precisely what we’ve been seeing over the past month.
Here’s a chart showing the average performance of the S&P500 from 6 months prior to 12 months after a Momentum Thrust Signal: [Read more…]