Originally Published on August 24
Good morning and welcome back to the land of blinking screens. Although the market’s primary cycles do not change often, I still like to start each week with a clear understanding of what type of market we are dealing with. For me, a quick glance at the color of the cycle board and the weekly/monthly S&P graphs below tells me an awful lot about the “state” of the key market cycles.
My Current Take…
There is one change to note on the Primary Cycle board this week. Our Global Risk Model, which looks at a series of “risk on” and “risk off” indicators for the global markets, moved to positive. I view this as a modest plus as one of the knocks against this market has been the lack of confirmation among global indices. So, with the board mostly green, there isn’t much to complain about here and the bulls are clearly in charge.
View the Primary Cycle Model Board Online* Source: Ned Davis Research (NDR) as of the date of publication. Historical returns are hypothetical average annual performances calculated by NDR. Past performances do not guarantee future results or profitability – NOT INDIVIDUAL INVESTMENT ADVICE.
In short, I continue to view the big-picture market environment as mostly positive. However, I believe it is VERY important to recognize that the anticipated improvement in both the economy and earnings – which stocks are currently discounting – needs to arrive on time and/or avoid being delayed/derailed.
View the Primary Cycles Board Online* Source: Ned Davis Research (NDR) as of the date of publication. Historical returns are hypothetical average annual performances calculated by NDR. Past performances do not guarantee future results or profitability – NOT INDIVIDUAL INVESTMENT ADVICE.
The Secular Market Cycle
Definition: A secular bull market is a period in which stock prices rise at an above-average rate for an extended period (think 5 years or longer) and suffer only relatively short intervening declines. A secular bear market is an extended period of flat or declining stock prices. Secular bull or bear markets typically consist of multiple cyclical bull and bear markets. Below is a monthly chart of the S&P 500 Index illustrating the current cycle, which we estimate began on March 9, 2009.
S&P 500 – Monthly
The Cyclical Market Cycle
Definition: A cyclical bull market requires a 30% rise in the DJIA after 50 calendar days or a 13% rise after 155 calendar days. Reversals of 30% in the Value Line Geometric Index since 1965 also qualify. A cyclical bear market requires a 30% drop in the DJIA after 50 calendar days or a 13% decline after 145 calendar days. Reversals of 30% in the Value Line Geometric Index also qualify. Below is a weekly chart of the S&P 500 illustrating the current cycle, which we estimate began on March 24, 2020.
S&P 500 – Weekly
In summary, my favorite market models, which have been designed to tell me what type of big-picture market cycle we are dealing with, are mostly positive, and the S&P 500 has broken to new highs on both a weekly and monthly closing basis. So, unless the bears can produce a meaningful reversal where the breakout on the weekly chart could be viewed as a “fake out” – and do it quickly – then I have little choice to continue to side with the bull camp.
Thought For The Day:
Be not afraid of going slowly, be afraid only of standing still. -Chinese Proverbs