The previous V-rallies lasted roughly 26 days, generally by then is when we hear a ton of bullish things; "lockout rally, the wall of worry will fuel the rally further," etc. This could very well be the case, however, getting overly aggressively after 26 up days has not paid off. The one big difference that separates this V-rally from the others is breadth. Breadth was extremely strong; we have not seen such a broad participation in a long time; last year is was all about a handful of stocks (Facebook, Amazon, Netflix, Google) the current rally was led for the most part by the Russell 2000. One can make an adamant case that such strong breadth bodes well over the intermediate time frame, this is good for us.
Over the past 15-months, the SP-500 is flat; it has traveled 4,700 points to end up exactly where it started. Sentiment has been predominantly bearish during, this time; this is normally considered a contrarian indicator with bullish implications, but an essential ingredient has been missing--optimism. The lack of optimism has been holding the market back; no one is excited. At some point in the future, the wall of worry is going to be unwound, and that will have bullish implications. As of now, bearish sentiment is something to keep in mind when the market is down huge as a bullish reason to do some buying.
The current election might be a small overhang for the market that will probably be felt in the summer months.
We have a plan in place for a few market scenarios.
- Last year's biggest losers have turned out to be this year's biggest winners.
- Gold had a tremendous move that peaked on 2/11 when sentiment got euphoric; Jose Canseco, Mark Cuban, Financial Times article "investors going bananas over gold". .
- We are probably here when it comes to the SP-500.
- My opinion is subject to change as new information comes in.
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