Market Timing 08 (Apr 2023 - Dec 26)

[winston]

The second stage of this bear market will be brutal

by Jeff Clark.

Now, perhaps your reaction is, “what bear market?”

As I write Monday, the S&P is just 4% below its all-time high set back in February. Plus, this earnings season has been strong; and on Friday, the University of Michigan’s consumer sentiment survey showed sentiment improved in late May.

If anything, it feels like bullish momentum could carry us deep into the summer.

Here’s Jeff explaining what he sees coming next:

This is what bear markets do.

The first rally phase in a bear market is designed to punish bearish traders who’ve held on to short positions for too long and then coax reluctant bulls back into the market.

It makes folks question if we’re even in a bear market at all.

Then, the bear takes another swipe.

To illustrate, Jeff points toward a similar setup during the bear market in 2022.

In the chart below, note how the S&P peaked in early January of that year, then suffered its first decline phase – about 16% in two months.

But then, it delivered a stunning “V” shaped rally where it recovered most of that initial decline. “What bear market?” was likely the reaction from investors.

V-shaped rallies are dangerous. Investors who sold at the bottom regret their decision. They buy back in at higher prices.

And, this time, they vow not to get “bluffed” out of positions on the next decline because apparently, stocks only go up.

During the second decline phase, these investors hold onto their stocks and endure larger losses because they’re convinced they made a mistake selling the first time around.

Jeff believes that even if he’s wrong, the S&P’s technical set-up limits additional gains from here:

If I am wrong, since the market is already in an extended condition – with the various moving averages expanded far away from each other – we’re not going to miss out on a huge move higher.

There’s not much fuel remaining for that sort of a move.

As we’ve highlighted in past Digests, Jeff believes we’re in the early stages of a bear market that won’t bottom until later this fall – potentially, somewhere around 4,125. But at that point, we’ll have what Jeff calls a “generational buying opportunity.”

Jeff warns that the financial sector will lead the market lower over the next several weeks.

Behind this call is the Bullish Percent Index for the Financial Sector (BPFINA) that just triggered a new sell signal.

It appears the bear is gearing up to take another swipe.

The last time the BPFINA generated a sell signal was in December.

Source: Investor Place

[winston]

BofA’s Hartnett Says Global Stocks Are Close to Sell Signal

by Sagarika Jaisinghani

The market is running too hot after surging 20% in just two months.

He cited data points on fund flows and market breadth as evidence that investors have been rushing into risk assets and positioning is getting stretched.

Inflows to stocks and high-yield bonds were 0.9% of overall assets in the past four weeks. Should that reading increase to more than 1%, it would be a marker for investors to sell.

At the same time, the market is approaching “overbought territory”. About 84% of country indexes are above their 50- and 200-day moving average. His sell trigger is when that metric reaches 88%.

Global equity funds have attracted about $515 billion so far this year, on track for their second-biggest inflow on record.

Source: Bloomberg

https://finance.yahoo.com/news/bofa-har ... 31975.html

[winston]

The Bond Market Gives the ‘All Clear’ Signal

by Brett Eversole

Stock investors panic at any sign of trouble. But bond investors only worry when the storm clouds are worth paying attention to.

The big indicator at the time was the interest-rate spread between risky high-yield bonds and risk-free U.S. Treasury bonds. When this spread spikes, it means bond investors are worried about defaults on risky bonds. And that only happens when a recession is imminent.

That means we don’t have to worry if the stock market rebound is a false move higher. Instead, we can trust the rally – and get bullish.

Source: DailyWealth.com

https://dailytradealert.com/2025/06/18/ ... ar-signal/

[winston]

Caution: The Stock Market May Pull Back in the Short-Term

by Jeff Clark

The relentless rally off the April low has created overbought conditions, which is generating multiple caution signs.

Folks who are looking to put money to work in the stock market ought to hold off at least for a few days.

There’s a good chance we’ll have a better opportunity to buy stocks at lower prices in the days ahead.

Source: Jeff Clark Trader

https://tradesoftheday.com/2025/06/30/c ... hort-term/

[winston]

Blue skies until July 28th

According to the seasonality tool, we’re in a bullish time of year. Over the past 15 years, the stretch from June 28 through July 28 has averaged a 3.35% gain.

This year, we’re tracking that pattern nicely. As I write, the S&P is up 2.14% since June 27 (June 28 was a Saturday this year).

So, here’s where we stand: if you’re a short-term term trader, historical seasonal patterns are in your favor for about another week and a half. But that’s when things change…

The seasonality tool is flashing a cautionary yellow starting just days later, when history suggests we’re in for a pullback.

Over the subsequent three months, the S&P has averaged negative returns over half the time. The average three-month performance clocked in at -1.81%.

"I want to get ahead of a major market inflection point our tool says will hit on July 30.

I’m not talking about a crash or a bear market. But it is a market regime shift.

The takeaway isn’t “get out of the market,” but we do need to alter our strategy and expectations.

Specifically, between now and July 28th, consider rotating your short-term trading gains into your high-conviction buy-and-hold positions.

If you keep any trades open as we get into August, ride them as long as you can, but be ready to pivot if/when seasonal headwinds roll in.

Source: Investor Place

[winston]

Stocks Have Surged to New Highs — But There’s Still Plenty of Upside Ahead

by Brett Eversole

Right now, you might be falling for the three most expensive words in investing… I missed it.

Stocks just finished one of their most impressive three-month rallies in history. The S&P 500 Index was up 26% in the three months after its April low. And that pushed the index back to all-time highs.

One of the best ways to succeed as an investor is to focus on the trend. Assets that are rising tend to keep rising. This tendency is the antithesis of “I missed it.” And history shows it’s about to play out once again.

This is a powerful setup. It tells us that we haven’t missed it. The gains should keep piling up from here… and stocks have the potential to keep soaring for years as the bull market continues.

It’s easy to worry about missing your chance after the kind of rally we just saw. But don’t fall victim to that mistake. There’s still plenty of upside ahead.

Source: DailyWealth.com

https://dailytradealert.com/2025/07/25/ ... ide-ahead/

[winston]

Are investors overlooking the upside risk in markets?

Stronger earnings, improving market breadth, and modest investor positioning could keep markets advancing

The critical question is whether investors are focusing too much on what could go wrong and missing what is quietly going right

by Audrey Goh

The “Trump trade” – higher equities, a softer US dollar and lower yields – seems to be holding.

1. Earnings and growth momentum could surprise
2. Liquidity and positioning leave room for risk-taking
3. Momentum is self-reinforcing


Given this, we would adopt the following strategies:
* Staying invested in the growth theme
* Diversifying thoughtfully
* Balancing discipline with flexibility
* Reassessing allocations

Source: Business Times

https://www.businesstimes.com.sg/wealth ... sk-markets

[winston]

Seasonality Tool

The basic idea is that certain price trends repeat year after year, regardless – not unlike the nature’s seasons.

Stocks don’t have summers and winters exactly. But we’ve been able to identify consistent, repeating cycles in stocks, currencies, and even commodities like oil and soybeans…

To give you an illustration of how it works, let’s look at the S&P.

The seasonality tool has flagged a major regime change – beginning now.

We have gotten a top around July 28. Then the market has stumbled before bottoming out in October.

Over the past 15 years, the S&P 500 has had an average return of -1.6%, falling as much as 15% during this window.

This doesn’t mean you need to get out of the market…

But it does suggest three responses:
1. Be ready for pullbacks and don’t let them shake you out of your high-conviction, long-term positions
2. Limit your bullish short-term trades to only those stocks that, historically, have shown they can climb during this historically weak season
3. Get cash ready to plow into to your high-conviction holds when they near their seasonal lows in the upcoming months

Source: Trade Smith

[winston]

These Three Indicators Tell Me the Nasdaq Uptrend Is Under Pressure

BY MIKE BURNICK

First, as you can see above, the number of stocks hitting new one-year highs outpaced those making new lows for 30 straight days. But that win-streak came to an end with last week’s market pullback.

Second, the technology sector had been on a stellar win streak of its own, trading one standard deviation above its 50-day price moving average for a stunning 55 straight days. That streak also ended with Friday’s pullback.

Third, as you can see above, the Nasdaq McClellan Summation Index has clearly turned down.

Bottom line: The decline in breadth tells me the uptrend in market-leading Nasdaq stocks may be under pressure. It could resolve itself in one of two ways: either a sideways trading range pause, or a steeper pullback in stocks. Now is the time to be prepared either way in advance.

Source: Jeff Clark Trader

https://jeffclarktrader.com/market-minu ... -pressure/

[winston]

This Time, We’re Following the Crowd

by Brett Eversole

In a bull market, overheated sentiment is the norm. It’s not always a reason to cut and run.

Of course, the market will eventually peak, just when investors think it can only go up. They’ll be wrong… But they’ll be right many times before that day comes.

That’s why we always stick with the trend. Right now, the trend is up. And according to history, the most likely outcome is that stocks will keep soaring from here.

Source: DailyWealth.com

https://dailytradealert.com/2025/08/21/ ... the-crowd/