Recent Bear Market Signs Short-Lived

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A week ago it seemed that Wall Street Bears were finally going to see their predictions come to fruition.

Bull Markets like those in Japan and Europe were finally showing signs of recession and growth countries like China were sporting lower upswings than in the beginning of the year.

There were other signs as well pointing to the beginning of a possible bear market. These included:

High-Yield Corporate Debt

Overall US Stock Market Plateau for November

Stable Defensive Sector Prices

Lower Bank Share Values

Small Stock Price Recession

Dow Jones Industrial Average Double 150 Point Drop

S&P Volatility Index Reaching a 3-Month High

Junk Bond ETF Sell-Off

All sound indicators of the beginning of the end of a bull market.

False Sign

As soon as all these indicators aligned in what seemed to be a predictable downturn, the tide quickly changed while investors saw the dip in numbers as an opportunity to start snatching up equities at bargain prices.

One of the most amazing turn of events was the international purchases of stock options across the globe relative to purchased puts, which culminated in a record 5-year high.

2017 Still Going Strong

The dip did not phase the overall numbers for the year as the global stock market is currently on track to produce a consistent rise in equity prices without even a 3% drawback over the entire year, an event not seen since 1995.

The stock market bounceback was not spurred by false enthusiasm either, as investors drew upon hard data supporting a continued boost to the global economy. These include:

Strong Housing Market

Strong Industrial Market

Less Bank Regulations

Rising Tech Stock Prices

Positive Numbers for Retail and Old Media Industry

Bears or Bulls?

While the recent upturn, supported by strong overall economic indicators, seemed to show that the bull market is not quite over yet, do not count the bears out.

The recent upturn may just be a seasonal habit usually seen this time of year. Add to that the fact that the upward swing was not as strong this year as it has been in the past couple of years and the current enthusiasm may not be so enthusiastic in the weeks and months to come.

Still, other historical stock market indicators continue to point to a market rise in the coming months.

In the past, every time the S&P 500 has seen a record high during the month of September, risen above 15% over the year in the month of October, or has increased at least 7 months in a row, the market continued to rise for the remainder of the year. In 2017, all these 3 indicators have proven true thus far.

True Test

Whether the market will continue to rise or end up falling all depends on whether next year’s corporate earnings projections hold true. If they continue to rise by 11% or more it will be highly unlikely to witness a bear market, at least in the first half of 2018.

 

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