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's RSI Indicator peaks and leaves overbought zone
The 10-day RSI Oscillator for SPY moved out of overbought territory on March 22, 2024. This could be a sign that the stock is shifting from an upward trend to a downward trend. Traders may want to look at selling the stock or buying put options. Tickeron's A.I.dvisor looked at 47 instances where the indicator moved out of the overbought zone. In of the 47 cases the stock moved lower in the days that followed. This puts the odds of a move down at .
Technical Analysis (Indicators)
Bearish Trend Analysis
The Stochastic Oscillator demonstrated that the ticker has stayed in the overbought zone for 8 days. The longer the ticker stays in the overbought zone, the sooner a price pull-back is expected.
The Moving Average Convergence Divergence Histogram (MACD) for SPY turned negative on April 01, 2024. This could be a sign that the stock is set to turn lower in the coming weeks. Traders may want to sell the stock or buy put options. Tickeron's A.I.dvisor looked at 49 similar instances when the indicator turned negative. In of the 49 cases the stock turned lower in the days that followed. This puts the odds of success 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 .
SPY broke above its upper Bollinger Band on March 20, 2024. This could be a sign that the stock is set to drop as the stock moves back below the upper band and toward the middle band. You may want to consider selling the stock or exploring put options.
Bullish Trend Analysis
The Momentum Indicator moved above the 0 level on March 18, 2024. You may want to consider a long position or call options on SPY as a result. In of 64 past instances where the momentum indicator moved above 0, the stock continued to climb. The odds of a continued upward trend are .
Following a 3-day Advance, the price is estimated to grow further. Considering data from situations where SPY advanced for three days, in of 361 cases, the price rose further within the following month. The odds of a continued upward trend are .
The Aroon Indicator entered an Uptrend today. In of 445 cases where SPY Aroon's Indicator entered an Uptrend, the price rose further within the following month. The odds of a continued Uptrend are .
Fundamental Analysis (Ratings)
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Category LargeBlend