Why I’m Optimistic About Recent Bull Market Developments | Exchange places with Tom Bowley

I have been optimistic for almost two years. Bullish rotation and Wall Street manipulation led to the start of the final leg of this secular bull market in June 2022. If you follow my research and work, you might remember these two headlines from YouTube:

We can see that these two calls took place in mid-June 2022 and late September 2022. accurate The worst would happen on October 13, 2022, but I’d say it’s pretty close. And at the time, very few people agreed with me. It’s okay though. Because my research is most important to me when I see things differently than others. History proved me right and that is the most important thing to me.

But bears do not give in easily. Because thinking like a bear is always in style. Pessimism is widespread among humans. It is this pessimism that absolutely fuels the bull market.

emotion

Folks, pessimism has just reached its peak and is starting to fall. The one-year (or 253-day) moving average of the Equities-Only Put-Call Ratio ($CPCE) has been incredibly accurate in predicting major bull market moves. It’s asking for one again, and again it’s right.

Emotions play a big role in the long-term direction of the stock market. The current long-term bull market is likely to be safe for months, if not years, as the options world remains pessimistic. Those same options traders were incredibly bullish at the end of 2021, right before the cyclical bear market in 2022. Simply put, there were no more buyers. everyone who wanted to come in It was already in it!

There could be a 5-6% decline at some point in 2024, and a 10% correction in the summer, but I’m confident we’ll end 2024 at an all-time high. The CPCE chart above is one reason why.

bullish rotation

The Bears have tried almost every excuse since mid-2022. Inflation and “Stop Fighting the Fed” were two of my favorite things at the time. Then the bears morphed into “the rally is too narrow”, “the width is weak”, and “it’s just a Magnificent 7!” I would say Magnificent 7 is the biggest part of SPY and QQQ. So if you could handpick 7 best performing stocks, it would be exactly 7! 🙂

But I agree that the best bull markets are those in which we participate broadly. At EarningsBeats.com, we absolutely prefer to see a rising tide lift all boats. The rally after October 27th is a rising tide that lifts all boats!

I analyzed the major rallies in the S&P 500 since the cyclical bear market low in October 2022. Take a look:

Shades of red represent narrow strengths in the three main offensive sectors: XLK, XLY, and XLC. The green shaded area highlights WIDE’s participation in the October 2023 low rally. The red rally led in four of the five aggressive sectors. The only thing missing was finance (XLF). But the green-shaded rally shows that all five aggressive sectors are leading, with several others not far behind. It’s the rising tide that lifts all boats.

Top 20 Top Performers

Many of us (maybe all of us?) suffer from some form of recency bias. Looking at last week’s rally, driven by Meta Platform’s (META) explosive quarterly earnings report, it’s easy to believe that the Magnificent 7 is back at it. But last week was more than that. That’s true if you look at stocks in the S&P 500 and NASDAQ 100. META was the best performer and certainly contributed to the gains in the major indices. However, if you look at the top 20 stocks (S&P 500 or NASDAQ 100) from last week, you will see a lot more than META.

This top 20 list includes a variety of sectors and industry groups. But you won’t get equal airtime on CNBC. Hear how META and AMZN drove the market higher. That’s not wrong, but it’s incomplete.

I mentioned several times last week that I believed META and AMZN would report blowout numbers, and that both succeeded. Check the charts, especially your relative performance compared to industry peers.

Meta:

AMZN:

I believe that if a company is a leading stock within a leading industry group, there is a huge advantage to its returns. I expect solid news from these companies, and it all comes down to whether those strong results are already reflected in the stock price at the time of announcement. If not, you will likely see the type of reaction we saw on META and AMZN many times over.

Tomorrow we’ll feature the companies we’re reporting on this week in the free EB Digest newsletter. I wouldn’t be shocked to see a huge improvement after earnings are released. I certainly expect the numbers to come in ahead of Wall Street’s consensus estimates. If you’d like to check out this powerful company, click here and enter your name and email address if you’re not already a free subscriber. No credit card required, and you can cancel your subscription at any time.

Happy trading!

tom