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.
Monday night we held our August Monthly Conference Call, which Premium Members can access and rewatch here.
In this post, we’ll do our best to summarize it by highlighting five of the most important charts and/or themes we covered, along with commentary on each.
The real answer is because a lot of charting software packages the past few decades have set it as a default.
But you also hear guys like Paul Tudor Jones talk about how below a 200 day moving average, you get out. In other words, bad things happen below the 200 day.
For me, I have reasons for doing everything. And while I understand that there are more like 252 trading days in a year, not 200, I still believe that if a stock is below its 200 day simple moving average, it's probably not in an uptrend.
This is specifically for my personal definition of an intermediate-term timeframe. I like to look out weeks and months, not years, and certainly not hours or days.
200 days is a good number for me. And while it's not perfect (hint: nothing is) looking at the percentage of stocks above their 200 day has historically given us some great washout signals.
Investors have a lot of questions right now. With sentiment and at some of the most pessimistic levels in history, what will it take for some of these trends to change in the second half of the year? I believe some major trends are already changing.
The Playbook takes a step back and looks at things from a more Structural perspective. If you're specifically looking for more tactical opportunities, you can check out this week's Live Mid-Month Conference Call.
Here's what we'll be discussing in our Q3 Playbook:
In bull markets you'll see a lot more stocks making new highs than new lows.
In the current market environment we're used to seeing the opposite.
Here's an update on how that's going. For those of you keeping track at home, we're now going on 34 consecutive weeks of more stocks making new lows than new highs:
