As our Sean Dillon has been saying for a while now, underlying market technicals have dramatically improved since late last spring. The underlying trend and breadth of stocks has shifted from very negative last May to quite positive today. Technicals matter. To put it simply: it’s hard to get a down market up when technicals are working against you…..and vice versa. Market technicals are materially better today and that’s a good thing.
“Breakaway momentum” is a technical term that I think both Sean and I would rather him tackle (mainly because he’s better at technicals than me), but here goes. When the 10-day advance/decline ratio (stocks going up vs stocks going down) gets to a heightened level of 2:1 it is rare, bullish, and positive. It’s only happened 24 times in the last 80 years. In 23 of those 24 times the equity market was higher 12 months FORWARD. Forward returns during those 23 observations averaged +20%.
I am not saying the market is going immediately up and I am not saying it is going up 20% immediately. What I am saying is you must respect sentiment and positioning and technicals. Sentiment is extremely weak, positioning is also weak (albeit better than it was in early fall 2022), and technicals have dramatically improved. Data is data.
“Price leads sentiment” ®Sean Dillon CMT, CFTe®
Chief Investment Officer
Congress Wealth Management LLC (“Congress”) is a registered investment advisor with the U.S. Securities and Exchange Commission (“SEC”). Registration does not imply a certain level of skill or training. For additional information, please visit our website at congresswealth.com or visit the Investment Adviser Public Disclosure website at www.adviserinfo.sec.gov by searching with Congress’ CRD #310873.
This note is provided for informational purposes only. Congress believes this information to be accurate and reliable but does not warrant it as to completeness or accuracy. This note may include candid statements, opinions and/or forecasts, including those regarding investment strategies and economic and market conditions; however, there is no guarantee that such statements, opinions and/or forecasts will prove to be correct. All such expressions of opinions or forecasts are subject to change without notice. Any projections, targets or estimates are forward looking statements and are based on Congress’ research, analysis, and assumption. Due to rapidly changing market conditions and the complexity of investment decisions, supplemental information and other sources may be required to make informed investment decisions based on your individual investment objectives and suitability specifications. This note is not a complete analysis of all material facts respecting any issuer, industry or security or of your investment objectives, parameters, needs or financial situation, and therefore is not a sufficient basis alone on which to base an investment decision. Clients should seek financial advice regarding the appropriateness of investing in any security or investment strategy discussed or recommended in this note. No portion of this note is to be construed as a solicitation to buy or sell a security or the provision of personalized investment, tax or legal advice. Investing entails the risk of loss of principal.
Comments are closed.