Shares have fallen 20% in the past year on fears of a looming decline in profits in 2023. Consider: 1) Half of the S&P 500 stocks are above their 200-day moving average; 2) Big industrial names such as Caterpillar, General Electric, Snap-On, Cummins, United Rental and Deere are at or near new highs, indicating that the world economy is improving; 3) Other indicators of global demand, semiconductor and metals inventories, have also risen more than 10% this year. It’s not quite a bull market yet, but it’s getting there. Skeptics abound Over the long weekend, much of Wall Street tried to dampen enthusiasm. “While we see the weight of evidence shifting to the positive, we must be careful not to fall prey to the impatience of the crowd, which seems eager to bid up their equity,” Lowry, the oldest US technical analysis service, opined. . The problem for Jonathan Krinsky at BTIG is that the first two weeks aren’t necessarily great numbers, especially after a big drop. “While this may be an early sign of a sustained new uptrend, this type of move in the first two weeks after a bad year is not atypical,” he said in a note to clients. “However, the third week of the year following -10% is when things get tougher,” Krinsky added. “The average week 3 trailing -10% is -0.63% over the years, and when the first two weeks are positive like they are now, the week 3 average return is -1.03% and less than 7 out of 10 times…Our the view remains that this is a counter-trend rally, but the next two weeks should be more telling as to the actual duration of this move.” What would it take for a true bull market to manifest itself? It depends on who you ask. For technicians like Wellington Shields, like Frank Gretz, it’s about breadth; more stocks are on fire, especially above a broad indicator such as the 200-day moving average. As noted above, about half of the S&P is above that level, but more is needed to really see growth; “The rule of thumb, so to speak, is 60% is a good market, 70% is a bull market,” Gretz said. note to customers on Friday. Lowry also wants to see a broader rally. Their metric. the major supporting indicators should take off their August highs (the S&P closed at 4,305 on August 16, about 8% higher than it is now). For more fundamental types, like CNBC senior analyst Ron Insana of Contrast Capital Partners, you need the Fed to reverse course. “You don’t get a secular bull market in stocks until the wind is at your back,” he said on “Power Lunch” on Friday. “And by that I mean a friendly Fed, right? A Fed that’s actually easing or stalling?” One thing is certain. everyone is very suspicious of merit. They doubt because. By the time earnings are out of line, the market will be long gone. The last point is very important to understand. there is a correlation between earnings and stock trends, but it’s complicated. “In market downtrends like this, prices usually drop 10 months before profits,” Gretz explains. “In other words, wait for earnings to decline and you’re about 10 months late in a new bull market. Emphasizing profits in the latter stages of a bear market seems like a misguided endeavor. Earnings and other news. It will always be bad at market lows.”
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