The major buy signal no one is talking about
I like to look at various cycles in my work and one you’ve probably heard of is the Presidential cycle.  This looks at what the S&P 500 (SPX) does every four years of a President’s term.  In general, the second year (where we are now) of the cycle tends to be the worst and the third year tends to be the strongest.  You’ve probably heard that many times before.
Well, we are currently in the second year of Obama’s second term.  So really, this can also be looked at as year six of his term.  Doing this shows much different results than what the average second year of all terms have done, as year six is actually extremely bullish.
Here are all the sixth years of the Presidential cycles going back to 1950. Each one is positive and the average return is 23.24%.  

Now take a look at the chart above.  The average year six bottoms right around now and has a furious rally into the end of the year.  Did history just repeat?  Each data point on the orange line on the chart above presents the average for each day of the year from the years 1958, 1986, 1998, and 2006 (all sixth years of the Presidential cycle).
Lastly, please note that year six for Nixon would have been ‘74 (Ford) when the SPX dropped nearly 30%.  Also year six for JFK would have been ‘66 (Johnson) when the SPX dropped nearly 20%.  Including those years would have given much different results, but I’m only looking for returns of the same President in office during year six.   Permalink

The major buy signal no one is talking about

I like to look at various cycles in my work and one you’ve probably heard of is the Presidential cycle.  This looks at what the S&P 500 (SPX) does every four years of a President’s term.  In general, the second year (where we are now) of the cycle tends to be the worst and the third year tends to be the strongest.  You’ve probably heard that many times before.

Well, we are currently in the second year of Obama’s second term.  So really, this can also be looked at as year six of his term.  Doing this shows much different results than what the average second year of all terms have done, as year six is actually extremely bullish.

Here are all the sixth years of the Presidential cycles going back to 1950. Each one is positive and the average return is 23.24%.  

image

Now take a look at the chart above.  The average year six bottoms right around now and has a furious rally into the end of the year.  Did history just repeat?  Each data point on the orange line on the chart above presents the average for each day of the year from the years 1958, 1986, 1998, and 2006 (all sixth years of the Presidential cycle).

Lastly, please note that year six for Nixon would have been ‘74 (Ford) when the SPX dropped nearly 30%.  Also year six for JFK would have been ‘66 (Johnson) when the SPX dropped nearly 20%.  Including those years would have given much different results, but I’m only looking for returns of the same President in office during year six.  

Why Boring Is Bullish
The past few weeks have been some of the least volatile in history.  For instance, we just went 14 straight days without a move up or down 0.50% on the S&P 500 (SPX), the longest such streak since 1969.  That one ended yesterday, but today is right back to a flattish day again.
Fellow Yahoo Finance Contributor Charlie Bilello noted two days ago that the standard deviation over the previous 10 trading days had been near one of the lowest over the past 15 years.  In other words, we are seeing a historically boring time.  Here’s the great chart Charlie used.

I wanted to dig in some and see what exactly this means, if anything.  So here’s what I did.  Going back to 1970, I took the difference of the highest and lowest trade on the SPX over 10 days.  Then divided that number by the close on that particular day.  This way it would account for intra-day volatility as well.  
For instance, you could have 10 really volatile days in a row, but they all close flat.  That probably wouldn’t do justice to what you just experienced if you only looked at the closes.  By including the intra-day moves, I feel, gives a better representation for just how volatile things really have been.  Below is what I found.  

Doing this showed that two days ago came in at just a 1.05% move over the previous 10 days.  This was the lowest since August ‘93 and was actually the 6th lowest since 1970!  Ha, yeah things are pretty slow out there.  
Next, I looked at all the instances that came in with less than a 1.40% return.  Once there was a signal there had to be at least 31 calendar days go by to take the next signal.  Did it this way to ignore clusters.  Although rare, when these happen they usually happen multiple times over a few weeks.  I only wanted to take the first result of each cluster.  This found just 18 previous signals.  Here are the returns after.  



An 89% chance of a higher SPX in three months?  Not too bad.  Here are the longer-term at-any-time returns on the SPX to compare.  Hint - better across the board when we have a super boring 10 days like we just did.  

Lastly, here are all the signals.  

Check out the six month returns.  Higher six months later the past 10 times in a row.  Not bad.  
So there you go, boring is bullish.
Photo courtesy of Potential Past.    Permalink

Why Boring Is Bullish

The past few weeks have been some of the least volatile in history.  For instance, we just went 14 straight days without a move up or down 0.50% on the S&P 500 (SPX), the longest such streak since 1969.  That one ended yesterday, but today is right back to a flattish day again.

Fellow Yahoo Finance Contributor Charlie Bilello noted two days ago that the standard deviation over the previous 10 trading days had been near one of the lowest over the past 15 years.  In other words, we are seeing a historically boring time.  Here’s the great chart Charlie used.

image

I wanted to dig in some and see what exactly this means, if anything.  So here’s what I did.  Going back to 1970, I took the difference of the highest and lowest trade on the SPX over 10 days.  Then divided that number by the close on that particular day.  This way it would account for intra-day volatility as well.  

For instance, you could have 10 really volatile days in a row, but they all close flat.  That probably wouldn’t do justice to what you just experienced if you only looked at the closes.  By including the intra-day moves, I feel, gives a better representation for just how volatile things really have been.  Below is what I found.  

image

Doing this showed that two days ago came in at just a 1.05% move over the previous 10 days.  This was the lowest since August ‘93 and was actually the 6th lowest since 1970!  Ha, yeah things are pretty slow out there.  

Next, I looked at all the instances that came in with less than a 1.40% return.  Once there was a signal there had to be at least 31 calendar days go by to take the next signal.  Did it this way to ignore clusters.  Although rare, when these happen they usually happen multiple times over a few weeks.  I only wanted to take the first result of each cluster.  This found just 18 previous signals.  Here are the returns after.  

image

An 89% chance of a higher SPX in three months?  Not too bad.  Here are the longer-term at-any-time returns on the SPX to compare.  Hint - better across the board when we have a super boring 10 days like we just did.  

image

Lastly, here are all the signals.  

image

Check out the six month returns.  Higher six months later the past 10 times in a row.  Not bad.  

So there you go, boring is bullish.

Photo courtesy of Potential Past.   

This Bullish Technical Pattern Says September Isn’t So Scary
Yes, September is historically very bearish.  Also, we’ve seen a huge uptick in bullish sentiment recently, which could be a near-term contrarian warning.  But at the same time, the overall price action continues to look very strong.  In the end, price is what pays.  
Although I am concerned about seasonality and bullish sentiment, price action suggests remaining bullish here is the best play.  
First off, the S&P 500 (SPX) is up five weeks in a row.  This is just the 10th time this has happened since the bull market started in 2009.  It is also the longest winning streak since eight in a row late last year.  
What is interesting about being up five weeks in a row is the returns after being up five straight weeks are actually rather strong.  Don’t sell everything just because we’re ‘up a lot’ is my warning here.  

Now here’s something that is very rare and could be another sign the bulls are still in firm control.  Last month, the SPX had what technicians call a bullish engulfing pattern.  This is a bullish pattern and one that I am a big fan of.  Here’s the definition from Investopedia.

These patterns tend to flush out the weak hands, which leads to higher prices.  You can look at them on an intraday or daily chart, but to see one happen on the more significant monthly chart is very meaningful to the bigger overall trend.

Here’s where things get interesting, this pattern is extremely rare.  I was very surprised to find that this pattern had happened just seven other times going back 30 years.  
Here is what happened after each occurrence.

Now here are the average returns after the previous seven monthly bullish engulfing patterns.  If you want to compare these returns to the at-any-time returns, I included those as well.  







A skeptic would say only seven instances could make the returns very random and I’d agree.  Nonetheless, I’d rather know than not know.  To me this bullish technical pattern suggests September, and probably the rest of this year, could be one for the bulls.  
Photo thanks to Marcia Furman.   Permalink

This Bullish Technical Pattern Says September Isn’t So Scary

Yes, September is historically very bearish.  Also, we’ve seen a huge uptick in bullish sentiment recently, which could be a near-term contrarian warning.  But at the same time, the overall price action continues to look very strong.  In the end, price is what pays.  

Although I am concerned about seasonality and bullish sentiment, price action suggests remaining bullish here is the best play.  

First off, the S&P 500 (SPX) is up five weeks in a row.  This is just the 10th time this has happened since the bull market started in 2009.  It is also the longest winning streak since eight in a row late last year.  

What is interesting about being up five weeks in a row is the returns after being up five straight weeks are actually rather strong.  Don’t sell everything just because we’re ‘up a lot’ is my warning here.  

image

Now here’s something that is very rare and could be another sign the bulls are still in firm control.  Last month, the SPX had what technicians call a bullish engulfing pattern.  This is a bullish pattern and one that I am a big fan of.  Here’s the definition from Investopedia.

image

These patterns tend to flush out the weak hands, which leads to higher prices.  You can look at them on an intraday or daily chart, but to see one happen on the more significant monthly chart is very meaningful to the bigger overall trend.

image

Here’s where things get interesting, this pattern is extremely rare.  I was very surprised to find that this pattern had happened just seven other times going back 30 years.  

Here is what happened after each occurrence.

image

Now here are the average returns after the previous seven monthly bullish engulfing patterns.  If you want to compare these returns to the at-any-time returns, I included those as well.  

image

image

A skeptic would say only seven instances could make the returns very random and I’d agree.  Nonetheless, I’d rather know than not know.  To me this bullish technical pattern suggests September, and probably the rest of this year, could be one for the bulls.  

Photo thanks to Marcia Furman.  

All You Need To Know About The August Jobs Report
The monthly jobs report for August comes out tomorrow before the open.  The consensus is for a gain of 235,000 jobs added.  Here are some stats I found interesting.
* More than 200,000 jobs have been created for six straight months.  If it happens again tomorrow it would be the longest streak since seven in a row back in ‘97.
* The all-time record for consecutive months over 200,000 jobs in a row is 15 in ‘83/’84.  14 straight occurred in the early ’40s and again in ‘76/’77.  
* The current 12 month average of 214,000 jobs created is the highest since April 2006.
* The current six month average of 244,000 jobs created is the highest since, once again, April 2006.
* August has seen an increase in jobs each of the past three years.  If it can make it to four, it’d be the longest streak since the mid-90s.
* The 235,000 jobs expected would be the most jobs produced in any August since 1998.
Turns out the summer months historically are rather slow for jobs growth, not a huge surprise.  What is worthwhile though is August is by far the weakest month since 1990.


The unemployment rate is expected to come in at 6.2%, which would match what we saw in July.  What matters here is the recent trend is moving lower.


Here’s a really interesting chart which shows various unemployment rates based on levels of education.  Not surprisingly, the more educated someone is, the better chance they’re employed.  


Lastly, here’s one of my favorite charts.  Starting in February 2008 (when the recession started) just 639,000 jobs have been created.  In fact, this was actually still negative until this past May.  

So what’s it gonna be tomorrow?  I’ll say 241,000 jobs created and 6.1% unemployment.  Yes, that is a total guess, probably like the rest of the economists out there.  
Photo courtesy of photologue_np.   Zoom Permalink

All You Need To Know About The August Jobs Report

The monthly jobs report for August comes out tomorrow before the open.  The consensus is for a gain of 235,000 jobs added.  Here are some stats I found interesting.

* More than 200,000 jobs have been created for six straight months.  If it happens again tomorrow it would be the longest streak since seven in a row back in ‘97.

* The all-time record for consecutive months over 200,000 jobs in a row is 15 in ‘83/’84.  14 straight occurred in the early ’40s and again in ‘76/’77.  

* The current 12 month average of 214,000 jobs created is the highest since April 2006.

* The current six month average of 244,000 jobs created is the highest since, once again, April 2006.

* August has seen an increase in jobs each of the past three years.  If it can make it to four, it’d be the longest streak since the mid-90s.

* The 235,000 jobs expected would be the most jobs produced in any August since 1998.

Turns out the summer months historically are rather slow for jobs growth, not a huge surprise.  What is worthwhile though is August is by far the weakest month since 1990.

image

The unemployment rate is expected to come in at 6.2%, which would match what we saw in July.  What matters here is the recent trend is moving lower.

image

Here’s a really interesting chart which shows various unemployment rates based on levels of education.  Not surprisingly, the more educated someone is, the better chance they’re employed.  

image

Lastly, here’s one of my favorite charts.  Starting in February 2008 (when the recession started) just 639,000 jobs have been created.  In fact, this was actually still negative until this past May.  

image

So what’s it gonna be tomorrow?  I’ll say 241,000 jobs created and 6.1% unemployment.  Yes, that is a total guess, probably like the rest of the economists out there.  

Photo courtesy of photologue_np.  

Bears At Their Lowest Level Since 1987.  Now What?
The big news today isn’t coming from the economy or world events, it is the fact the number of bears in the US Advisors’ Sentiment Report came in at their lowest level since February 1987 at just 13.3%.
This matters because many use this poll as a contrarian indicator.  The thinking goes if there are no bears left, then we could be near a major peak as there is no one left to buy as everyone is bullish.  Lastly, this poll looks at what newsletter writers are thinking.  

Then the fact the last time the bears were beneath 14% was in 1987 and you have all the ingredients for an intriguing headline as well.  Now before you go out and sell all your stocks, remember the S&P 500 (SPX) gained +16.6% the six months after the late February signal in 1987.  Sure, we had the one-day crash of 20% later in October, but there were some spectacular gains to be had for a long time first.
My point is it is so hard to truly quantify exactly what this means or when it truly becomes bearish.  Sure, it is a major concern, as too many could be getting excited right at the wrong time.  The best time to have been buying was probably a month ago when everyone was in a panic that the long-awaited 10% correction was finally coming.  
Going back to 1970, I looked at all the times the Bears dropped beneath 14%.  Most of these happened in clusters, so I took just the first signal and there had to be at least two months go by without another signal for the next one to count.  Again, this is done just to remove clusters.

Pretty weak returns across the board.  Flat a year later isn’t going to do much for the bulls.  
Now considering September seasonality is a worry, combined with the crowd getting a little to bullish, it all could make the next few weeks a bit tougher to see big gains.  
I’ll leave you with this thought.  Technically, I continue to see very few problems with the market.  One of my favorite indicators is the cumulative advance/decline issues at the NYSE.  When you have many issues advancing, this usually means the overall market will follow suit.  Not much wrong with this picture.  

Now does this negate the bullish sentiment and weak seasonality?  I have no clue, but I think it suggests we won’t have a massive drop in September like we saw in ‘11 (-7%) and ‘08 (-9%).  
Photo courtesy of Jeff Block.   Permalink

Bears At Their Lowest Level Since 1987.  Now What?

The big news today isn’t coming from the economy or world events, it is the fact the number of bears in the US Advisors’ Sentiment Report came in at their lowest level since February 1987 at just 13.3%.

This matters because many use this poll as a contrarian indicator.  The thinking goes if there are no bears left, then we could be near a major peak as there is no one left to buy as everyone is bullish.  Lastly, this poll looks at what newsletter writers are thinking.  

image

Then the fact the last time the bears were beneath 14% was in 1987 and you have all the ingredients for an intriguing headline as well.  Now before you go out and sell all your stocks, remember the S&P 500 (SPX) gained +16.6% the six months after the late February signal in 1987.  Sure, we had the one-day crash of 20% later in October, but there were some spectacular gains to be had for a long time first.

My point is it is so hard to truly quantify exactly what this means or when it truly becomes bearish.  Sure, it is a major concern, as too many could be getting excited right at the wrong time.  The best time to have been buying was probably a month ago when everyone was in a panic that the long-awaited 10% correction was finally coming.  

Going back to 1970, I looked at all the times the Bears dropped beneath 14%.  Most of these happened in clusters, so I took just the first signal and there had to be at least two months go by without another signal for the next one to count.  Again, this is done just to remove clusters.

image

Pretty weak returns across the board.  Flat a year later isn’t going to do much for the bulls.  

Now considering September seasonality is a worry, combined with the crowd getting a little to bullish, it all could make the next few weeks a bit tougher to see big gains.  

I’ll leave you with this thought.  Technically, I continue to see very few problems with the market.  One of my favorite indicators is the cumulative advance/decline issues at the NYSE.  When you have many issues advancing, this usually means the overall market will follow suit.  Not much wrong with this picture.  

image

Now does this negate the bullish sentiment and weak seasonality?  I have no clue, but I think it suggests we won’t have a massive drop in September like we saw in ‘11 (-7%) and ‘08 (-9%).  

Photo courtesy of Jeff Block.  

Welcome To September, The Worst Month Of Them All
September is the worst month of the year, as I’m sure you’ve heard many times by now.  Let’s take a look and see just how bad it really is.  
Going back to 1950, September is down -0.47% and up just 45% of the time.  Both of those are the worst for any month.  

Going back 50 years we see similar weakness.


Even more recently, going back to 1980, September is the only month with a negative return.


Now we just had the best August since 2000 at up +3.77%.  Does this mean anything?  Turns out, a big August is usually bearish, as six of the past seven times September was lower after a 3% August pop.

Take another look at the years above.  I noticed the years 1987 and 2000 and it got me thinking a little more.  August made new all-time highs those years also, just like 2014.  August was up more than 3% both of those years as well, just like 2014.  
My pal Jon Krinsky of MKM also noticed this, but he dug in a little deeper and found that since 1928 when August was up more than 3% and also made a new all-time high, September was up just one time out of nine occurrences.  That right there is one to remember.       

Let’s turn gears and take a look at the CBOE Volatility Index (VIX).  Going back to 1990, September is the second most bullish month for the VIX, as it gains about 8% on average - only July is better.  Remember, a higher VIX historically results in lower stock prices.   

Besides volatility, it is worth noting that gold historically has done well in September.  This month is the top month going back to 1970.

Back to equities now.  What about the Presidential Cycle?  This is year two of that cycle and again September doesn’t do much to get the bulls excited.

I’ve noted before this is the second year of the second term.  So we can call this year six.  Here is what happens that year.  A little better, but just four instances.

So with all of this, it is all but certain we drop in September, right?  Maybe not, as recently September has actually done pretty well.  The past five years September is up four times and has a very respectable +2.11% average return.  

Even going out 10 years, September has been up a very impressive eight times and is up about a percent on average.  The big thing to be aware of here is the two times it was down saw losses of nine and seven percent.  So when September has been down lately, it is really down.  

Lastly, a fun fact is September is home to the worst 5-day return going back to 1950.  September 19-24 returns an average of -1.04%, which again is weaker than any other five day combination.   
After slicing and dicing things many different ways, history says be on your toes this month.  Do we have to crash and burn, of course not.  In fact, I still see many reasons to expect higher prices in September.  But the reality is September is a month to be very leery of from a seasonality point of view.  
Photo courtesy of Gary Burke.  

Permalink

Welcome To September, The Worst Month Of Them All

September is the worst month of the year, as I’m sure you’ve heard many times by now.  Let’s take a look and see just how bad it really is.  

Going back to 1950, September is down -0.47% and up just 45% of the time.  Both of those are the worst for any month.  

image

Going back 50 years we see similar weakness.

image

Even more recently, going back to 1980, September is the only month with a negative return.

image

Now we just had the best August since 2000 at up +3.77%.  Does this mean anything?  Turns out, a big August is usually bearish, as six of the past seven times September was lower after a 3% August pop.

image

Take another look at the years above.  I noticed the years 1987 and 2000 and it got me thinking a little more.  August made new all-time highs those years also, just like 2014.  August was up more than 3% both of those years as well, just like 2014.  

My pal Jon Krinsky of MKM also noticed this, but he dug in a little deeper and found that since 1928 when August was up more than 3% and also made a new all-time high, September was up just one time out of nine occurrences.  That right there is one to remember.       

Let’s turn gears and take a look at the CBOE Volatility Index (VIX).  Going back to 1990, September is the second most bullish month for the VIX, as it gains about 8% on average - only July is better.  Remember, a higher VIX historically results in lower stock prices.   

image

Besides volatility, it is worth noting that gold historically has done well in September.  This month is the top month going back to 1970.

image

Back to equities now.  What about the Presidential Cycle?  This is year two of that cycle and again September doesn’t do much to get the bulls excited.

image

I’ve noted before this is the second year of the second term.  So we can call this year six.  Here is what happens that year.  A little better, but just four instances.

image

So with all of this, it is all but certain we drop in September, right?  Maybe not, as recently September has actually done pretty well.  The past five years September is up four times and has a very respectable +2.11% average return.  

image

Even going out 10 years, September has been up a very impressive eight times and is up about a percent on average.  The big thing to be aware of here is the two times it was down saw losses of nine and seven percent.  So when September has been down lately, it is really down.  

image

Lastly, a fun fact is September is home to the worst 5-day return going back to 1950.  September 19-24 returns an average of -1.04%, which again is weaker than any other five day combination.   

After slicing and dicing things many different ways, history says be on your toes this month.  Do we have to crash and burn, of course not.  In fact, I still see many reasons to expect higher prices in September.  But the reality is September is a month to be very leery of from a seasonality point of view.  

Photo courtesy of Gary Burke.  

A 60% Drop in Stocks, Really?

Yesterday, CNBC noted that two experts were warning of the coming 60% crash.  Now at first I’m thinking, here we go again.  We’ve heard these warnings time and time again, only for them to be wrong every time.  None the less, I clicked on the link and saw the two experts were David Tice and Abigail Doolittle.  

Here’s what you need to know, they’ve both been bearish for years now.  Mr. Tice is the founder of the Prudent Bear Fund and Ms. Doolittle has been noting bearish technical patterns in the face of a huge bull market for years.

Trust me, I’m wrong a lot also.  You trade long enough, we are all wrong plenty of times.  What aggravates me though is how dangerous it is to simply stick to a position.  If your wrong, so what?  Close the trade and find another one.  Being stubborn and sticking to a bad trade or wrong thesis is one of the most dangerous things you can do and is one of the best ways to lose money.  

One of the keys to being successful over time is being able to adapt.  

I call it being a chameleon trader.  The chameleon is one of the most adaptive animals ever.  If they need to turn red to hide, they turn red.  They have no agenda, just adapt and survive.  Adapt or Die is another favorite market saying of mine.

As traders, I think this is very similar.  If the environment changes, you need to change as well - and fast.  Although I’ve been called a perma-bull many times, in late June I started seeing a lot warnings.  Eventually we had the 4% dip (and much larger in small caps)  and pure fear came into the market. That was a clue we were about to rally once again.  Fortunately for me, it all worked out this time.  But my main point is don’t have a bias, just trade what your indicators tell you.  And if you are wrong, accept it.  Don’t be a hero.  

Here’s a CNBC spot I did with Ms. Doolittle back in May ‘13.  The SPX is up a cool +25% since then and she has a lot of the same bearish arguments.  Sure, it’ll be right eventually, but my big takeaway is be very careful who you listen to, as they might have an agenda under the surface you don’t know about.

The Nasdaq-100 Hasn’t Been Red For Two Weeks, Now What?

The market makes a habit of fooling the masses.  That is how it works, always has and always will.  Seriously, how many have sat on the sidelines just the past 12 months focusing on the scary headlines.  This time a year ago all the rage was the coming ‘87 like crash.  

For this reason, I do my best to avoid any emotion in my trading and use quantified data and sentiment instead.  Last year, nearly all the studies I did suggested a big second-half rally was coming.  This wasn’t a popular call at the time to say the least.  But, by looking at past history, it helped show a guide for what might happen.  Many a year ago were saying margin debt was high and we were due for an ‘87 like crash because of this.  As you know now, that didn’t happen.  

Here’s a great example of how digging a little bit deeper can show surprising results.  

The PowerShares 100 Trust (QQQ) hasn’t been red since August 12.  First off, the QQQ is an ETF based on the Nasdaq-100.  So these are the largest stocks listed on the Nasdaq in a one nice big basket.  

image

The current streak is 10 trading days in a row the QQQ hasn’t closed negative.  I find a few things interesting about this.  Two weeks ago all the talk was how that 10% dip we hadn’t seen in three years was coming.  Sentiment had moved to a full blown panic in a lot of cases on just a 4% S&P 500 (SPX) dip.  

Also we heard a lot how weak breadth was in the QQQ.  Facebook (FB) was about the only stock leading it anymore.  Breadth looks at how many stocks are going up along with the Index.  It measures internal strength.  Well, all we’ve done since these warnings is see one of the best streaks in the history of the QQQ.

Here’s where the current streak ranks all-time.

image

Now for the best part.  I went back and looked at the top three streaks and found what the QQQ did after 10 straight days without being red.  The results were what I’d call surprising.  Most would probably guess the near-term is weak.  None the less, the returns are simply stellar.  

image

image

Significantly better results across the board on all timeframes.  How about that?  Sure, there are just three occurrences and you could argue this is totally random.  Still, to me, this much strength usually results in more strength.  

Here are the three times it made it to 10 days and the returns after.

image

So today if you see a talking head on tv or social media say the QQQ has gone two weeks without being red and this is bearish, you can know that the quantified data simply doesn’t back that up.

Continue to dig deeper in your analysis and always question conventional wisdom.  Thanks for reading.  

Why This Bull Market Could Last Another 15 Years
Is there really another 15 years to the current bull market?  Chris Hyzy of US Trust said just that Monday on CNBC.  The call got a lot of press and needless to say, the very vocal group of bears who have been fighting this bull market for years scoffed at this even having the slightest chance.
He isn’t the first person to say something like this, as fellow Yahoo Finance Contributor Ralph Acamapora said the exact same thing back in May.  In late 2010, I started saying we were now in a new secular bull market.  It was pretty early for that call and I got my fair share of hate for saying it.  Four years later I still feel we’re in a secular bull market.  I have no clue how far it’ll eventually go, but I do think we have many years left.  
One trademark of true bull markets is new all-time highs.  The S&P 500 (SPX) made 45 new all-time highs last year and has added another 30 so far in 2014.  That’s a good thing, don’t be fooled into thinking new highs are bearish.  
Last month, I showed that new all-time highs had returns after new highs pretty much in-line with the at-any-time average returns.  So making new highs isn’t some bearish event like so many claim.  
Now for the good stuff, new highs tend to happen in clusters that can last years.
To keep this very simple, we saw new highs in the ’50s and ’60s, then very few in the ’70s.  Then continued new all-time highs for another two decades, ending with the horrible overall performance of the 2000s.  Now here we are in a fresh new decade and new highs are starting to pop up again.

Take another look at that chart above.  Could we really have another 15 years of this bull market?  At first, it sounds ridiculous to even ask I’ll admit, but once you look at the chart above we can all agree it is at least possible.   
So one last time, could we really have another 15 years of the this bull market?  I have no idea to be honest.  Still, my best advice is be open to it.  It has happened before and very well could happen again.  Don’t be one of the guys using CAPE ratios to stay out or blaming QE for the bull market.  Good luck out there.
Photo thanks to Watcher1999.   Zoom Permalink

Why This Bull Market Could Last Another 15 Years

Is there really another 15 years to the current bull market?  Chris Hyzy of US Trust said just that Monday on CNBC.  The call got a lot of press and needless to say, the very vocal group of bears who have been fighting this bull market for years scoffed at this even having the slightest chance.

He isn’t the first person to say something like this, as fellow Yahoo Finance Contributor Ralph Acamapora said the exact same thing back in May.  In late 2010, I started saying we were now in a new secular bull market.  It was pretty early for that call and I got my fair share of hate for saying it.  Four years later I still feel we’re in a secular bull market.  I have no clue how far it’ll eventually go, but I do think we have many years left.  

One trademark of true bull markets is new all-time highs.  The S&P 500 (SPX) made 45 new all-time highs last year and has added another 30 so far in 2014.  That’s a good thing, don’t be fooled into thinking new highs are bearish.  

Last month, I showed that new all-time highs had returns after new highs pretty much in-line with the at-any-time average returns.  So making new highs isn’t some bearish event like so many claim.  

Now for the good stuff, new highs tend to happen in clusters that can last years.

To keep this very simple, we saw new highs in the ’50s and ’60s, then very few in the ’70s.  Then continued new all-time highs for another two decades, ending with the horrible overall performance of the 2000s.  Now here we are in a fresh new decade and new highs are starting to pop up again.

image

Take another look at that chart above.  Could we really have another 15 years of this bull market?  At first, it sounds ridiculous to even ask I’ll admit, but once you look at the chart above we can all agree it is at least possible.   

So one last time, could we really have another 15 years of the this bull market?  I have no idea to be honest.  Still, my best advice is be open to it.  It has happened before and very well could happen again.  Don’t be one of the guys using CAPE ratios to stay out or blaming QE for the bull market.  Good luck out there.

Photo thanks to Watcher1999.  

Did the Options Market Just Fire a Major Warning for Stocks?
We’re making new highs and everything is great, right?  Well, maybe things are a little too good and the masses are just buying everything they can now, which is a huge contrarian warning.  
The ISE Sentiment Index is a proprietary put/call ratio that uses only opening long customer transactions.  In other words, it is measuring how many people are buying a new position in bullish call options or bearish put options.  I like to use put/call ratios to see if the masses are getting too one-sided.  Remember, once everyone is expecting something, it rarely happens when it comes to investing.  
This ratio is actually constructed as a call/put ratio and it just had three straight days over 200, meaning there were twice as many calls opened versus puts.  Again, when everyone is buying calls (especially on equities like this ratio tracks) that could be a warning traders are a little too excited.  
Here’s what really has Twitter buzzing right now.  The previous two times we saw three straight days >200 were 1/16/14 and 7/22/11.  The S&P 500 (SPX) dropped -3.43% and -10.83% just 10 days later.  
Here’s the chart so far YTD.  The only meaningful weakness so far this year took place just after the last time this happened.  Could a quick drop happen again here?  

You have to go back nearly three years for the most recent time other than January we saw three straight days >200.  Back in July ‘11 we saw five straight days and this took place just ahead of the huge August correction.  

So on the surface this indeed does seem pretty scary.  Now I’m not a big fan of just using two data points and saying it matters.  It could be random.  Going back to 2006 and I found there were 42 other times this ratio was >200 for 3 straight days.  Here are the returns after.  

Not much to like about those stats if you are bullish.  Negative across the board, that is tough to do.  
My pal @Market_Time created this great chart last night on the subject.  It shows all the signals with a chart of the SPX since 2006.

Finally, here are the longest streaks (since 2006) of consecutive trading days with this ratio >200.  A few things stand out to me.  First off, the longest streak ever took place just a few months before a major market peak.  Also there was a streak of six in a row in October ‘07, right as the market peaked.  April 2010 saw two streaks of six in a row and this took place just as the market was forming a major peak that took nearly seven months to get back above.  Lastly, we simply haven’t seen this phenomena the last few years.  

There’s no other way than to say this is a worry if you are bullish.  Now one trait of this bull market since 2013 is it has ignored nearly all previous bearish signals that once worked in the past.  Can it do it again?  
Photo courtesy of Eduard Titov.  

Permalink

Did the Options Market Just Fire a Major Warning for Stocks?

We’re making new highs and everything is great, right?  Well, maybe things are a little too good and the masses are just buying everything they can now, which is a huge contrarian warning.  

The ISE Sentiment Index is a proprietary put/call ratio that uses only opening long customer transactions.  In other words, it is measuring how many people are buying a new position in bullish call options or bearish put options.  I like to use put/call ratios to see if the masses are getting too one-sided.  Remember, once everyone is expecting something, it rarely happens when it comes to investing.  

This ratio is actually constructed as a call/put ratio and it just had three straight days over 200, meaning there were twice as many calls opened versus puts.  Again, when everyone is buying calls (especially on equities like this ratio tracks) that could be a warning traders are a little too excited.  

Here’s what really has Twitter buzzing right now.  The previous two times we saw three straight days >200 were 1/16/14 and 7/22/11.  The S&P 500 (SPX) dropped -3.43% and -10.83% just 10 days later.  

Here’s the chart so far YTD.  The only meaningful weakness so far this year took place just after the last time this happened.  Could a quick drop happen again here?  

image

You have to go back nearly three years for the most recent time other than January we saw three straight days >200.  Back in July ‘11 we saw five straight days and this took place just ahead of the huge August correction.  

image

So on the surface this indeed does seem pretty scary.  Now I’m not a big fan of just using two data points and saying it matters.  It could be random.  Going back to 2006 and I found there were 42 other times this ratio was >200 for 3 straight days.  Here are the returns after.  

image

Not much to like about those stats if you are bullish.  Negative across the board, that is tough to do.  

My pal @Market_Time created this great chart last night on the subject.  It shows all the signals with a chart of the SPX since 2006.

Finally, here are the longest streaks (since 2006) of consecutive trading days with this ratio >200.  A few things stand out to me.  First off, the longest streak ever took place just a few months before a major market peak.  Also there was a streak of six in a row in October ‘07, right as the market peaked.  April 2010 saw two streaks of six in a row and this took place just as the market was forming a major peak that took nearly seven months to get back above.  Lastly, we simply haven’t seen this phenomena the last few years.  

image

There’s no other way than to say this is a worry if you are bullish.  Now one trait of this bull market since 2013 is it has ignored nearly all previous bearish signals that once worked in the past.  Can it do it again?  

Photo courtesy of Eduard Titov.  

The Market Can Stay Irrational Longer Than You Can Stay Solvent
That quote is by John Maynard Keynes and is one of the better explanations of what can happen if you trade in markets long enough.
With that, here’s proof the market doesn’t always do what you’d think.  
If you follow me on Twitter or StockTwits, then you know I’ll throw out a lot of studies.  Some might be a stretch (like who wins the Word Cup and what the SPX does after), but most of the time I’m looking for things others aren’t talking about and trying to find an edge.
Yesterday while doing some research, I found these two interesting stats on the Nasdaq and they prove just how difficult trading can be if you think logically.  
First up, the Nasdaq is up five days in a row.  This is the fourth time we’ve seen that in 2014, with the longest winning streak an impressive eight in a row back in February.  For fun, the longest winning streak ever for the Nasdaq was an amazing 19 trading days in a row in 1979.  
Now back to being up five days in a row.  A logical person would probably say that is near-term bearish, as the market is over-extended.  Well, turns out going back to 1978 the Nasdaq actually does better across the board up to three months after being up five days in a row.

Time for the real head scratcher.  I keep a database of all the Nasdaq returns since 1978 and I was playing in there yesterday and found that March 12, 1999 was the single best day to buy the Nasdaq and hold for one year, as you’d have gained +111.99% just 12 months later.  Why is this significant?  The Nasdaq was up a cool +122% the three years coming into this fateful day.  Would you really be buying there?  
Any logical person would say something up that much wasn’t worth buying.  Now sure, I get it.  Had you bought on March 12, 1999 and held for two years the returns would be much different.  Still, this hammers home just how irrational markets can be and ignoring what is ‘normal’ could actually benefit you sometimes.  

We’re all looking for those rare outliers to make our year.  Don’t be scared of them when they could be happening right in front of you.  Ride the trend for all it’s worth, but be aware it’ll end badly - they always do.  Be smart enough to get off once the trend starts to show major deterioration.  
Good luck out there.  
Picture courtesy of Doug Caldwell. Permalink

The Market Can Stay Irrational Longer Than You Can Stay Solvent

That quote is by John Maynard Keynes and is one of the better explanations of what can happen if you trade in markets long enough.

With that, here’s proof the market doesn’t always do what you’d think.  

If you follow me on Twitter or StockTwits, then you know I’ll throw out a lot of studies.  Some might be a stretch (like who wins the Word Cup and what the SPX does after), but most of the time I’m looking for things others aren’t talking about and trying to find an edge.

Yesterday while doing some research, I found these two interesting stats on the Nasdaq and they prove just how difficult trading can be if you think logically.  

First up, the Nasdaq is up five days in a row.  This is the fourth time we’ve seen that in 2014, with the longest winning streak an impressive eight in a row back in February.  For fun, the longest winning streak ever for the Nasdaq was an amazing 19 trading days in a row in 1979.  

Now back to being up five days in a row.  A logical person would probably say that is near-term bearish, as the market is over-extended.  Well, turns out going back to 1978 the Nasdaq actually does better across the board up to three months after being up five days in a row.

image

Time for the real head scratcher.  I keep a database of all the Nasdaq returns since 1978 and I was playing in there yesterday and found that March 12, 1999 was the single best day to buy the Nasdaq and hold for one year, as you’d have gained +111.99% just 12 months later.  Why is this significant?  The Nasdaq was up a cool +122% the three years coming into this fateful day.  Would you really be buying there?  

Any logical person would say something up that much wasn’t worth buying.  Now sure, I get it.  Had you bought on March 12, 1999 and held for two years the returns would be much different.  Still, this hammers home just how irrational markets can be and ignoring what is ‘normal’ could actually benefit you sometimes.  

image

We’re all looking for those rare outliers to make our year.  Don’t be scared of them when they could be happening right in front of you.  Ride the trend for all it’s worth, but be aware it’ll end badly - they always do.  Be smart enough to get off once the trend starts to show major deterioration.  

Good luck out there.  

Picture courtesy of Doug Caldwell.

Remembering The Google IPO
Hard to believe, but Google (GOOGL) had it’s IPO 10 years ago today.  This event was met with an extreme amount of skepticism and doubt.  Could a search engine with no real profits even work?  Sounds silly now, but a decade ago very few thought this company would even work - let alone become one of the largest companies in the world.
The shares went public at $85/share, which was the low end of the range - making it an immediate disappointment in the eyes of many.  Shares gained +18% that first day, closing at $100/share.  Sounds good, but not the huge gains some had hoped for given this was the biggest tech IPO since the tech crash a few years earlier.  
Leading up to the IPO, the company had a good deal of drama.  My favorite being a Playboy magazine interview which drew the attention of the SEC.  Apparently the SEC actually reads that magazine.  
“I’m not buying,” said Stephen Wozniak, an Apple (AAPL) co-founder.  “Past experience leaves the taste that a few people — never ourselves — will make out the first day, but that it’s not likely to appreciate a lot in the near future or maybe even the long future,” he said.
“Only time will tell if the company can fend off efforts by Yahoo (YHOO) and Microsoft (MSFT) to build superior search engines,” said the New York Times.  
The big question at that time was the $27 billion valuation.  The shares are worth $400 billion today by the way.  
"To see a market capitalization valuing Google as a mature company is assuming a best-case scenario which isn’t a for-sure outcome. It still has a long way to go to justify growing into that kind of market value," said Michael Cohen, director of research with Pacific American Securities.

Sure there might have been a few GOOGL bulls out there, but the masses wanted very little to do with this one.  
So August 2004 had a flurry of ‘overvalued’ articles - Google it if you want.  Then by October 2004 the analysts had just 36% ‘buy’ ratings on it.  Now here’s the beauty of what can happen when you have a lot of negative sentiment that doesn’t play out - it can spark huge rallies.  In the face of all of this negativity, the shares doubled by the end of 2004. 
After doubling again in 2005, there was a brief pullback in early 2006 and this sparked a ‘Gurgle’ Barron’s cover.  This one marked the calendar year low and the shares eventually soared to over 700 by late 2007.  

By now, everyone loved the company.  Funny how that works.  Analysts now had 91% buys (it was just 36% in October 2004) and tech was a consensus favorite sector heading into 2008.  Remember, around the time of the IPO no one trusted tech after the tech bubble implosion.  Add it up and the overall sentiment picture had totally flipped.  That by itself wasn’t a reason to turn bearish, but it was a reason to worry.
Then it happened, in late 2007 BusinessWeek had a very bullish cover titled “Google’s Next Big Dream.”  Expectations were simply too high for any company at this point.  Any little mistake could lead to a waterfall of selling.  

The shares began to underperform in early 2008, yet analysts now defended the shares.  Option activity continued to show heavy call buying, so a ‘pick the bottom’ mentality had set in.  These were much different that the attitude on the way up and said something had changed.  
Over the next year or so the shares dropped more than 65%.  

This example has officially gone down in history at how fading the consensus can be a very powerful tool when it comes to trading.  Things don’t always line up this well, but when they do it can lead to spectacular gains.  
Picture courtesy of Keso. Permalink

Remembering The Google IPO

Hard to believe, but Google (GOOGL) had it’s IPO 10 years ago today.  This event was met with an extreme amount of skepticism and doubt.  Could a search engine with no real profits even work?  Sounds silly now, but a decade ago very few thought this company would even work - let alone become one of the largest companies in the world.

The shares went public at $85/share, which was the low end of the range - making it an immediate disappointment in the eyes of many.  Shares gained +18% that first day, closing at $100/share.  Sounds good, but not the huge gains some had hoped for given this was the biggest tech IPO since the tech crash a few years earlier.  

Leading up to the IPO, the company had a good deal of drama.  My favorite being a Playboy magazine interview which drew the attention of the SEC.  Apparently the SEC actually reads that magazine.  

“I’m not buying,” said Stephen Wozniak, an Apple (AAPL) co-founder.  “Past experience leaves the taste that a few people — never ourselves — will make out the first day, but that it’s not likely to appreciate a lot in the near future or maybe even the long future,” he said.

“Only time will tell if the company can fend off efforts by Yahoo (YHOO) and Microsoft (MSFT) to build superior search engines,” said the New York Times.  

The big question at that time was the $27 billion valuation.  The shares are worth $400 billion today by the way.  

"To see a market capitalization valuing Google as a mature company is assuming a best-case scenario which isn’t a for-sure outcome. It still has a long way to go to justify growing into that kind of market value," said Michael Cohen, director of research with Pacific American Securities.

Sure there might have been a few GOOGL bulls out there, but the masses wanted very little to do with this one.  

So August 2004 had a flurry of ‘overvalued’ articles - Google it if you want.  Then by October 2004 the analysts had just 36% ‘buy’ ratings on it.  Now here’s the beauty of what can happen when you have a lot of negative sentiment that doesn’t play out - it can spark huge rallies.  In the face of all of this negativity, the shares doubled by the end of 2004. 

After doubling again in 2005, there was a brief pullback in early 2006 and this sparked a ‘Gurgle’ Barron’s cover.  This one marked the calendar year low and the shares eventually soared to over 700 by late 2007.  

image

By now, everyone loved the company.  Funny how that works.  Analysts now had 91% buys (it was just 36% in October 2004) and tech was a consensus favorite sector heading into 2008.  Remember, around the time of the IPO no one trusted tech after the tech bubble implosion.  Add it up and the overall sentiment picture had totally flipped.  That by itself wasn’t a reason to turn bearish, but it was a reason to worry.

Then it happened, in late 2007 BusinessWeek had a very bullish cover titled “Google’s Next Big Dream.”  Expectations were simply too high for any company at this point.  Any little mistake could lead to a waterfall of selling.  

image

The shares began to underperform in early 2008, yet analysts now defended the shares.  Option activity continued to show heavy call buying, so a ‘pick the bottom’ mentality had set in.  These were much different that the attitude on the way up and said something had changed.  

Over the next year or so the shares dropped more than 65%.  

image

This example has officially gone down in history at how fading the consensus can be a very powerful tool when it comes to trading.  Things don’t always line up this well, but when they do it can lead to spectacular gains.  

Picture courtesy of Keso.

Welcome To The Worst Six Months Of The Year?

As I’m sure you’ve heard by now, historically the May to October period is one of the worst six month timeframes, while the November to April period is very strong.  Today I wanted to take a closer look at this theory.  Is it true?  Or is there more to the story if you dig a little bit?

Going back to 1950 on the SPX, you can see the average return during the November to April timeframe is significantly better than from May to October.  Meaning we are in the heart of the worst six months currently.  

image

What about the other six month periods?  Have you ever wondered how things did from December to May?  I did, and below breaks down the other months.  Interestingly enough, the November to April period is the strongest and the May to October period is the worst.  Guess everyone was right about which periods to avoid and which to be long.  

image

This is the second year of the Presidential Cycle.  Historically, year two isn’t that strong.  Well, this is true once again, as the average November to April in year two goes down to an average of just +3.34% versus the average November to April return of +7.15%.  But what about the May to October during year two?  That one actually has a negative return, so we’re right in the heart of a very weak period it looks like.  

image

Now looking at all four years in the Presidential Cycle, you’ll find that year two is the weakest and the current six months is the only one to average a negative return!  Seasonality isn’t playing anyone any favors here and now.  

image

The beauty of the current weak six month stretch is that it opens the door to some awesome gains.  Now take one more look above.  The November to April period in year three of the Presidential Cycle has never been lower since 1950 and averages a very impressive +16%!  In other words, we are just a few months away from one of the most bullish periods every four years.  We’ve just got to get there first.  

Lastly, here are all the six month periods broken down by Presidential Cycle years.  Check out the bolded area below.  August to January during year three of the Presidential Cycle (so right now) is actually rather strong - up +11.4% on average and up 75% of the time.  So maybe things aren’t so dour and seasonality is on our side?  

image

In fact, each of the next five months all are parts of six month periods which are the strongest in the Presidential Cycle.  All average double digit returns, with some very high chances of being positive.  

So maybe we aren’t in the middle of such a weak time seasonally like so many claim.  Doing a little more research reveals the next six months are some of the most bullish out of the entire four year cycle.  Good luck out there.  

Interview with MoneyBeat

While in New York last week for the Yahoo Finance Contributors party I dropped by the Wall Street Journal and shot a quick video with Paul Vigna for MoneyBeat.  

We talked about how August is usually volatile and sure enough, 10 minutes after we were done the Dow dropped 150 points due to Ukraine/Russia tensions.  Ha.

Also touched on seasonality, sentiment, why remaining bullish makes sense, mutual fund flows, and more.   

Watch the full video here.  

Just How Old Is This Bull Market?
So just how old is this bull market when you put it up against some of the others?  As my pal Michael Batnick noted, it has been a very long time since we’ve had a 10% correction and this has a lot of traders worried we’ve gone too long without a much needed correction.
So what about that 10% correction?  By my math, we’ve now gone 34 months without a 10% correction on a closing basis.  We did hit the magical 10% correction land on an intraday basis back in June ‘12, but I’m just talking closes here.  
Since 1950, the current streak is getting up there, but we could go another 34 months and still not be at the all-time streak from the ’90s.  

Another popular streak is the number of days the S&P 500 (SPX) has been above its 200-day moving average.  Turns out, the SPX has closed an amazing 435 straight days above this long-term trendline.  Again, getting up there, but it isn’t unprecedented for this streak to last a little bit longer. 

Let’s talk sentiment for a second.  One of the more amazing streaks in that world is how many weeks in a row we’ve seen bulls in the Investors Intelligence Poll come in above the 50% area.  Before this year we were all taught that being above the critical 50% was a huge warning of too much optimism.  Turns out you can rally in the face of a lot bulls and we have done that since February.  In fact, the current streak of 24 straight weeks sounds like a lot, till you see the amazing 45 straight weeks of bulls above 50% back in ‘03/’04.  

How about this one, the Russell 2000 (RUT) is up eight quarters in a row, the longest streak ever!

The SPX on the other hand is up six quarters in a row.  Sounds like a lot, till you realize out of the four other times this has happened, three of those times it went up at least another four quarters in a row.

What about the CBOE Volatility Index (VIX)?  Seriously, no market conversation is complete without talking about everyone’s favorite fear/greed indicator.  Since 1990 the VIX has averaged exactly 20.  The funny thing is it usually doesn’t trade around that area for very long.  It’ll spend years well beneath that area, then years well above that area.  
Check out this chart.  For seven years in the ’90s and four years last decade it traded beneath 20.  This current streak is just over two years old.  Once again, this streak is impressive, but it wouldn’t be crazy for it to continue for a very long time.  

Lastly, what about the length of other bull markets?  I mean, that is the best way to gauge just how this bull stacks up, right?  
The current bull market is 65 months old.  It is now older than the ‘03/’07 bull market, but it isn’t anywhere close to the amazing 153 month bulls we saw twice just since ‘75 or the 151 month bull that died in 1961.

What does all of this mean?  Hey, the bull market could die tomorrow for all I know, but I like to take a bigger look at things sometimes.  It might seem like this bull cycle has been going on forever, but it is very possible it could keep going a lot longer if you look at the length of other bull markets.  Be open to it is all I’m saying.  
Photo courtesy of Podolux. Zoom Permalink

Just How Old Is This Bull Market?

So just how old is this bull market when you put it up against some of the others?  As my pal Michael Batnick noted, it has been a very long time since we’ve had a 10% correction and this has a lot of traders worried we’ve gone too long without a much needed correction.

So what about that 10% correction?  By my math, we’ve now gone 34 months without a 10% correction on a closing basis.  We did hit the magical 10% correction land on an intraday basis back in June ‘12, but I’m just talking closes here.  

Since 1950, the current streak is getting up there, but we could go another 34 months and still not be at the all-time streak from the ’90s.  

image

Another popular streak is the number of days the S&P 500 (SPX) has been above its 200-day moving average.  Turns out, the SPX has closed an amazing 435 straight days above this long-term trendline.  Again, getting up there, but it isn’t unprecedented for this streak to last a little bit longer. 

image

Let’s talk sentiment for a second.  One of the more amazing streaks in that world is how many weeks in a row we’ve seen bulls in the Investors Intelligence Poll come in above the 50% area.  Before this year we were all taught that being above the critical 50% was a huge warning of too much optimism.  Turns out you can rally in the face of a lot bulls and we have done that since February.  In fact, the current streak of 24 straight weeks sounds like a lot, till you see the amazing 45 straight weeks of bulls above 50% back in ‘03/’04.  

image

How about this one, the Russell 2000 (RUT) is up eight quarters in a row, the longest streak ever!

image

The SPX on the other hand is up six quarters in a row.  Sounds like a lot, till you realize out of the four other times this has happened, three of those times it went up at least another four quarters in a row.

image

What about the CBOE Volatility Index (VIX)?  Seriously, no market conversation is complete without talking about everyone’s favorite fear/greed indicator.  Since 1990 the VIX has averaged exactly 20.  The funny thing is it usually doesn’t trade around that area for very long.  It’ll spend years well beneath that area, then years well above that area.  

Check out this chart.  For seven years in the ’90s and four years last decade it traded beneath 20.  This current streak is just over two years old.  Once again, this streak is impressive, but it wouldn’t be crazy for it to continue for a very long time.  

vix chart_years under 20 historically

Lastly, what about the length of other bull markets?  I mean, that is the best way to gauge just how this bull stacks up, right?  

The current bull market is 65 months old.  It is now older than the ‘03/’07 bull market, but it isn’t anywhere close to the amazing 153 month bulls we saw twice just since ‘75 or the 151 month bull that died in 1961.

image

What does all of this mean?  Hey, the bull market could die tomorrow for all I know, but I like to take a bigger look at things sometimes.  It might seem like this bull cycle has been going on forever, but it is very possible it could keep going a lot longer if you look at the length of other bull markets.  Be open to it is all I’m saying.  

Photo courtesy of Podolux.