Why Market Malaise Equals Golden Opportunity
I think this is the best buying opportunity for stocks since the winter of 2016.
In that year, a corporate earnings per share (EPS) decline of 11% led the S&P 500 into a -15.2% correction over a period of nine months. In my view, the correction during 2015/2016 was warranted -- fundamentals were weak, corporations were struggling, and the economy was growing at a snail's pace.
The exact opposite economic conditions exist today (and that's not just my opinion), yet the S&P 500 has declined in a sharp and scary way over a four-month period, by about the same amount (~15%). I think the S&P 500 is oversold, and that investors are selling based on an emotional response to an imminent recession that isn't actually imminent. Look at it another way: US GDP grew approximately 3.25% in 2018, but the S&P 500 declined -4.4% over the same time period! Something doesn't add up, and I think investor psychology is to blame.
There is little doubt that the US economy is likely to slow some in 2019. But some key facts remain about the economy’s overall health: the US's unemployment rate is 3.7%, near a 50-year low, and wages are rising at about 3.1% while core inflation is 2.2%. Because all attention was focused on Apple’s rare earnings revision on January 3, few people noticed that the private sector added 271,000 jobs in December, significantly more than the 178,000 that economists expected. Corporate earnings are expected to grow 8% in 2019 and virtually no investment bank on Wall Street sees a recession in 2019. To me, there is a clear disconnect between what the economy is doing and what the stock market is doing.
As we go forward in the new year, it will probably take clearer evidence of positive economic and earnings growth, a trade breakthrough with China, the end of the government shutdown, and a Fed “pause” before we see reduced volatility and sustained recovery in the equity markets. I think all of those things will happen, and that when they do the market will have a solid runway to move higher.
As Warren Buffet once said, "be fearful when others are greedy and greedy when others are fearful." There is plenty of fear in the market today, and my view is that it's time to be bullish. My opinion now is to go hard against the crowd and take the opportunity to buy while others are selling. I think it will be rewarded if the S&P 500 hits 3,000 this year, which I believe that it will.
SPY sees MACD Histogram just turned negative
SPY saw its Moving Average Convergence Divergence Histogram (MACD) turn negative on December 10, 2024. This is a bearish signal that suggests the stock could decline going forward. Tickeron's A.I.dvisor looked at 51 instances where the indicator turned negative. In of the 51 cases the stock moved lower in the days that followed. This puts the odds of a downward move at .
Technical Analysis (Indicators)
Bearish Trend Analysis
The 10-day RSI Indicator for SPY moved out of overbought territory on December 09, 2024. This could be a bearish sign for the stock. Traders may want to consider selling the stock or buying put options. Tickeron's A.I.dvisor looked at 46 similar instances where the indicator moved out of overbought territory. In of the 46 cases, the stock moved lower in the following days. This puts the odds of a move lower at .
Following a 3-day decline, the stock is projected to fall further. Considering past instances where SPY declined for three days, the price rose further in of 62 cases within the following month. The odds of a continued downward trend are .
Bullish Trend Analysis
The Stochastic Oscillator suggests the stock price trend may be in a reversal from a downward trend to an upward trend. of 42 cases where SPY's Stochastic Oscillator exited the oversold zone resulted in an increase in price. Tickeron's analysis proposes that the odds of a continued upward trend are .
The Momentum Indicator moved above the 0 level on December 24, 2024. You may want to consider a long position or call options on SPY as a result. In of 68 past instances where the momentum indicator moved above 0, the stock continued to climb. The odds of a continued upward trend are .
SPY moved above its 50-day moving average on December 20, 2024 date and that indicates a change from a downward trend to an upward trend.
Following a 3-day Advance, the price is estimated to grow further. Considering data from situations where SPY advanced for three days, in of 362 cases, the price rose further within the following month. The odds of a continued upward trend are .
SPY may jump back above the lower band and head toward the middle band. Traders may consider buying the stock or exploring call options.
The Aroon Indicator entered an Uptrend today. In of 446 cases where SPY Aroon's Indicator entered an Uptrend, the price rose further within the following month. The odds of a continued Uptrend are .
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