Does the Rally have Legs? POLL

[Norbert]

Does the rally have legs? Why? What are the technicals and / or fundamentals telling you?

Please choose the best reply given what we know today.

Obviously, nobody knows. Still, what's your hunch?

[racqueteer]

I'm not personally liking any of those answers, Norbert. My personal feeling is that the market thinks we're done with rates and maybe we'll get a cut shortly. I feel like we're probably ok through eoy at least; maybe summer, but rate cuts would be summer at best.  I think we have an investable bounce to work with; no prediction beyond that.  Not sure what choice that is though; four?

[uncleharley]

Definitely, the bottom is in and the trend is up.

[gman57]

Yes, end of year rally after 3 down months. We're good until March as new money (beginning of year contributions) into IRA/ROTHS/401K's will hit the market during Jan/Feb. The economy is slowing down albeit slowly and after March... dang,  my crystal ball gets a little blurry that far out.

[rhythmmethod]

My hunch is that we will probably go up and then go down. I don’t mean to be flippant but it is a time like this to reevaluate your allocation, yield, risk level as actionable.

[Mustang]

I guess I'm the pessimist. The bubble has burst. Unemployment rate is around 3.8%. I can remember when the bottom was considered 5% because of transient unemployed. At the same time workforce participation is around 62.7% which is where it has run for 10 years. For various reasons people are not looking for work with help wanted signs everywhere. There are shortages of truck drivers, mechanics, etc. Shortages drive up wages. Because of recent inflation, unions are demanding and getting higher wages. Spending has been stubbornly high. Even though some are running out of savings and credit cards, higher wages will keep spending high. Inflation has not yet been conquered. The Fed is hoping for a soft landing but rates will continue to be high for a while. And it might take a couple more rate increases to get us into a recession. Some are forecasting late 2024.

I think interest rates will rise again and will be one of the causes of stocks going down.

[Karen]

www.fxempire.com/forecasts/article/technical-market-insight-week-ending-10-november-1386312

Excerpt:

S&P 500: Breakout Buying?
You may recall the following points from last week’s technical research (italics):

Considering the current chart studies, bears may have difficulty at current levels given we have monthly and daily support levels in play. Hence, this may trigger a bout of profit-taking this week, which could draw the index back to retest weekly resistance at 4,177.

Although monthly support from 4,102 was left unchallenged, daily support made it into the fight at 4,104. Up +5.9% last week (the most significant one-week advance this year), buyers staged a strong rebound from the support area.

The monthly timeframe—entrenched within a longer-term uptrend—is now eyeing a run to the 4,607 top printed in July, which shares chart space near weekly resistance at 4,595. Technically speaking, the weekly timeframe is still trending lower, but this could change following a higher low and subsequent higher high.

As a note, the Relative Strength Index (RSI) is now in positive territory (> 50.00) on the monthly and weekly timeframes.

On the daily chart, the week settled closing above the 200-day and 50-day simple moving averages at 4,247 and 4,347, respectively, and challenged resistance at 4,363.

Looking ahead, for bulls to remain at the wheel this week, technicians will want to observe a dominant close beyond 4,363. Not only would this help reaffirm the bullish perspective, but it may open the door to breakout buying opportunities towards resistance on the daily timeframe at 4,473. Conservative traders may seek a retest of 4,363 before committing, yet more aggressive traders could simply elect to enter on a bullish close north of current resistance. Should sellers attempt to make a show from resistance in early trade, the 50-day simple moving average may serve as dynamic support for price to rechallenge the resistance level.

[retiredat48]

Norbert ,racqueteer ,uncleharley ,gman57 ,rhythmmethod ,Mustang ,Karen ...

I posted the following in September:

--------------------------------

I see the market as fairly normal.



Fairly normal means strong seasonal patterns exist entering and exiting Q4. That pattern is typically(posted about it often):



"Stocks have a very poor September, followed by a bottom in week 1 or 2 in October. Then stocks recover, and November and December are strong upward months. Tax loss selling effects end about 20 December."



So here is the most likely market direction I see for Q4:



"Stocks have a very poor September, followed by a bottom in week 1 or 2 in October. Then stocks recover, and November and December are strong upward months. Tax loss selling effects end about 20 December."



It's not rocket science.



I will be doing some repositioning shortly, and adding some monies now sitting in Money Market funds, into selected stock funds.

-----------------------------------------------

Today's UPDATE:  I see no reason to change this "most likely outcome." The market bottomed about two weeks later than stated (Israel/Hamas war not easy to foresee), but otherwise spot-on. And this week I posted I bought for brother's retiree portfolio, some VIG and SCHD. He says he is a happy camper.  Note:  There is always a "wall-of-worry" of reasons why market will not go up in Nov/Dec; yet I will almost never sell anything in these two months.  This year, not unusual for Q4.

Edit to add: I do not invest based on predictions. And I use 200 day Moving Average Controls as one pillar of my investing. Should the market go back down through this Moving Average control ,it changes the most likely market direction. But I currently give this a low probability for remainder of Q4.

Also I do not see this position in any poll selection alternative above, so have not voted.

Will revisit 29 December...


R48

[mani]

Nov 5, 2023 14:03:02 GMT Mustang said:

I guess I'm the pessimist. The bubble has burst. Unemployment rate is around 3.8%. I can remember when the bottom was considered 5% because of transient unemployed. At the same time workforce participation is around 62.7% which is where it has run for 10 years. For various reasons people are not looking for work with help wanted signs everywhere. 

Per definition, it looks like that rate includes then entire Civ. Non Inst. Pop.  (people above 16)

"The labor force participation rate is calculated as: (Labor Force ÷ Civilian Noninstitutional Population) x 100."

www.bls.gov/cps/definitions.htm#:~:text=The%20labor%20force%20participation%20rate,or%20actively%20looking%20for%20work.
www.bls.gov/charts/employment-situation/civilian-labor-force-participation-rate.htm

Given the boomer generation retiring, seeing the rate drop is lust logical. It's not that people from working age are not willing to work.

It you look at the WORKING AGE participation rate, it is actually hovering near record high (as high as any time in history except for the 1996-2001 period).

fred.stlouisfed.org/series/LNS11300060

So yes, retirees don't want to work

[Mustang]

"For various reasons people are not looking for work with help wanted signs everywhere."

Yes, retiree are not looking for work (although many have reentered the workforce because of inflation).  And to be honest, retirement is boring.  I have recommended to my younger brothers to keep working part time as long as they can.  Those that work part-time at least 1 hour per week are consider employed

But, there are other reasons, one is a two income household with kids. As my wife and I learned, after expenses the difference in income isn't worth it. After all of the expenses were deducted we discovered that the difference in our income was $25 per week. I was in the military. My wife quit working.

Other reasons are college, taking care of a sick relative and probably many more that I can't think of.

[fred495]

"The stock market just finished its best week in almost a year, but lurking beneath the euphoric surface are fears about Corporate America’s profit outlook.

Among companies that have issued guidance this earnings season for next quarter and beyond, more have been providing estimates that trail analysts’ expectations. A gauge of forward guidance that compares corporate forecasts with the Wall Street consensus has been lower only once since 2019, data compiled by Bloomberg Intelligence show."

There is also the prospect of a prolonged government shutdown and a market that is still relatively expensive. The Fed's inflation target remains at +2% and rate hikes are still possible.

As a conservative and retired investor, I prefer to err on the side of caution and feel quite comfortable earning a risk-free 5.3%+ in CDs and a Treasury Floating Rate Bond ETF at this time.

Didn't vote, but good luck,

Fred

[oldskeet]

Hi guys. I am not sure what the market is going to do in the near term. This is why I am invested within my all weather asset allocation of 20% cash, 40% income, and 40% equity. Currently, it has an interest and dividend yield of 3.8% with a distribution yield which includes mutual funds capital gains distributions of around 5+%. In addition, there are at times some spiff income as well. Over the past ten years my total return has averaged north of 8% annually. I will let my Barometer aid me in when to overweight equities and when to go light. Because of a seasonal investment strategy that I usually employ I am currently carrying a 3% weighting in my equity ballast sleeve. Should Congress formulate and approve a budget without shutting down before Thanksgiving I may add another percent weighting to it. I am feeling good caution is warranted in this investment climate and leave the swing trades for the traders as I am more of a long term investor that at times positions around the edges.

With this, my vote in the poll is that this is a bear market rally.

[Karen]

Nov 6, 2023 11:53:41 GMT oldskeet said:

Hi guys. I am not sure what the market is going to do in the near term. This is why I am invested within my all weather asset allocation of 20% cash, 40% income, and 40% equity. Currently, it has an interest and dividend yield of 3.8% with a distribution yield which includes mutual funds capital gains distributions of around 5+%. In addition, there are at times some spiff income as well. Over the past ten years my total return has averaged north of 8% annually. I will let my Barometer aid me in when to overweight equities and when to go light. Because of a seasonal investment strategy that I usually employ I am currently carrying a 3% weighting in my equity ballast sleeve. Should Congress formulate and approve a budget without shutting down before Thanksgiving I may add another percent weighting to it. I am feeling good caution is warranted in this investment climate and leave the swing trades for the traders as I am more of a long term investor that at times positions around the edges.

With this, my vote in the poll is that this is a bear market rally.

In order for it to be "a bear market rally, wouldn't we have needed to be in a, you know, bear market? 

Pretty sure we came out of our last bear market in June 2023.
www.cbsnews.com/news/bear-market-ends-s-p-500-enters-bull-market/

More recently, we were in correction territory.

[newtecher]

Recession is becoming likelier with the new data (beginning before or around year-end but formally announced much later). Fundamentally, it does not bode well for the stock market (but Mr. Market often ignores fundamentals).

[oldskeet]

Hi Karen, Fair enough. Seems small caps were back of 20% with large caps down a little better than 10%.

Mike Wilson feels from reading his recent blurbs that this recent throw back rally was nothing more than a bear market rally of sorts.

From my recent viewing, short interest is now on the uptick.

[Karen]

Nov 6, 2023 12:56:03 GMT oldskeet said:

Hi Karen, Fair enough. Seems small caps were back of 20% with large caps down a little better than 10%.

Mike Wilson feels from reading his recent blurbs that this recent throw back rally was nothing more than a bear market rally of sorts.

From my recent viewing, short interest is now on the uptick.

Not trying to be fair, just accurate. 

Posters routinely misstate things about corrections and bear markets.  It gets old to a man like my husband who worked in the bizness for over three decades.

A bear market is a major average decline of 20+%.  We were NOT down 20+% (or even close to it) so we were not in a bear market (or a bear "market...of sorts," whatever that is!).

Pretty much any day of the year Mike Wilson will say/post something bearish about the future.     

[newtecher]

Nov 6, 2023 15:36:44 GMT Karen said:

Nov 6, 2023 12:56:03 GMT oldskeet said:

Hi Karen, Fair enough. Seems small caps were back of 20% with large caps down a little better than 10%.

Mike Wilson feels from reading his recent blurbs that this recent throw back rally was nothing more than a bear market rally of sorts.

From my recent viewing, short interest is now on the uptick.

Not trying to be fair, just accurate. 

Posters routinely misstate things about corrections and bear markets.  It gets old to a man like my husband who worked in the bizness for over three decades.

A bear market is a major average decline of 20+%.  We were NOT down 20+% (or even close to it) so we were not in a bear market (or a bear "market...of sorts," whatever that is!).

Pretty much any day of the year Mike Wilson will say/post something bearish about the future.     

In 2001, S&P increased from 1103 on Apr 4 to 1244 on May 21 (more than 20%). Would you call it a bull market based on your definition?


I think most people would call it a rally in an extended bear market (from March 2000 to July 2002). I do not think there is a strict definition for a bull market (or a recession for that matter) and they are only clear in hindsight. We may well be in an extended bear market since Dec 2021.

[retiredat48]

newtecher , and oldskeet,... I understood the points you were making.

R48

[oldskeet]

Hi again Karen. To be accurate and clear. My bear market rally comment simply reflected that I expect stock prices to be bearish near term and fall. Nothing more. Nothing less.

[archer]

I pick #3, for this year. Next year new all time highs. This year I think the market will take out 4650 if not it's 2023 high, but I'm not so sure about a new all time high this year. Relative outperformance of QQQ and XLK vs SPY shows me that the market makers are not fearing a recession. The market is smarter than I am so I'm not going to argue with the outperformance trend of risky and interest rate sensitive areas of the market.

However if the fed lowers rates anytime soon the market could take it as a sign possible recession, but I really doubt the fed will lower this year.

Secular bull will continue barring any economic or political catastrophe.

[richardsok]

From this morning's Marketwatch: "....Guggenheim Investments thinks investors should look past the carnage in bonds and gear up for the Federal Reserve to pivot to rate cuts.

While the investment team expects the Fed to leave its policy rate unchanged at a 22-year high of 5.25% to 5.5% over the next several meetings, they also see a recession as likely in the first half of 2024.

That backdrop could spark a quick Fed pivot “to rate cuts, ultimately cutting rates by around 150 basis points next year...."

------
Which suggests to me longer term bonds (and Pimco CEFs) may indeed be an opportunity at today's prices and interest rates. On equities, I remain agnostic. As mentioned before, I try to focus on what IS happening rather than predict what WILL happen.

[retiredat48]

A comment...If we have a recession, small or severe next year, there will be CONSIDERABLE INSIDE POLITICAL HEAT to begin lowering rates. Biden will arm-twist the fed...and they usually respond in election years. Biden must be able to say he is "doing something." Fed rationale will be the "dual mandate", as in, unemployment is rising, so need to consider the workers along with inflation goal.

R48

[Mustang]

Some headlines that fuel my pessimism.  These all were in today's business section.
1. Accounting giant cuts more employees in anticipation of possible recession. www.foxbusiness.com/economy/us-accounting-giant-to-lay-off-more-of-its-workforce
2. Americans turn to credit cards to cover everyday expenses as high inflation grips households. www.foxbusiness.com/economy/credit-card-debt-hits-new-record-delinquencies-also-rise
3. High inflation is forcing more Americans to tap their 401(k) plans at an alarming rate. www.foxbusiness.com/economy/401k-hardship-withdrawals-are-surging-high-inflation-squeezes-americans
4. Shark Tank’ star warns inflation is fueling a ‘downsized America’ www.foxbusiness.com/economy/kevin-oleary-nasty-inflation-creating-downsized-america
5. Home Depot co-founder says he’s not optimistic about country's future. www.foxbusiness.com/markets/home-depot-co-founder-my-customers-getting-killed-bidens-inflation

Consumers are fueling the economy and they are running out of money. Optimists may be blind to this.  Pessimists may focus on it too much.

The market tries to price in what they see coming but the market isn't entirely logical. There is a herd mentality to investors. The market improves and the herd thinks its a bull market (without any changes in fundamentals). A loud noise panics the herd sending it running for safety (again without any changes in fundamentals.) Traders try to take advantage of this but herd movements does not mean the economy has changed.

[uncleharley]

3rd qtr GDP report trumps the above. jmho.

[rhythmmethod]

There is a WHOLE slew of national and international events that charts will not predict but could throw a huge monkey wrench into the works. Pick your side - there are plenty on both. I hope people are not acting on the results of this straw poll. I'm sure it was intended for entertainment only. I urge people to cover their needed income, balance their allocation to risk levels, and hold a good amount of cash. Be careful out there.

[Karen]

Nov 6, 2023 15:48:04 GMT newtecher said:

Nov 6, 2023 15:36:44 GMT Karen said:

Not trying to be fair, just accurate. 

Posters routinely misstate things about corrections and bear markets.  It gets old to a man like my husband who worked in the bizness for over three decades.

A bear market is a major average decline of 20+%.  We were NOT down 20+% (or even close to it) so we were not in a bear market (or a bear "market...of sorts," whatever that is!).

Pretty much any day of the year Mike Wilson will say/post something bearish about the future.     

In 2001, S&P increased from 1103 on Apr 4 to 1244 on May 21 (more than 20%). Would you call it a bull market based on your definition?


I think most people would call it a rally in an extended bear market (from March 2000 to July 2002). I do not think there is a strict definition for a bull market (or a recession for that matter) and they are only clear in hindsight. We may well be in an extended bear market since Dec 2021.

Did I define bull market in my post?  No, I did not. 

I very generally defined a bear market in order to point up that what the poster stated was clearly incorrect.

Not sure what you are trying to do here?  Undermine my post?  Discredit me?  By twisting what I posted? 

Or are these honest questions?

If these are honest questions, I'd need to look at past years S&P charts to answer it.  And I'm really not interested in what happened in 2001 or being tested on such. 

Besides, what difference would it make to you or anybody else what I THINK that 2001 market move was?

Here are the widely accepted, general definitions of bull and bear markets, in case you really want to know.
www.investopedia.com/terms/b/bullmarket.asp
www.investopedia.com/terms/b/bearmarket.asp

[anitya]

It will be interesting to see how the poll numbers changed everyday the poll is open. May be Norbert is able to share that info when he reveals the poll results at the end.

Since there is discussion beyond the poll itself, I would like to know posters' opinion about the lackluster follow through for small and mid caps and for Value, while interest rates have not changed that much (except volatility) since the poll began.

[habsui]

I vote for short legs.
Mainly because I believe that inflation will not go below 3% easily and a recession is still possible in 2024.

(Side note, listening too much to Fox Business will turn you into a pessimist..)

[mani]

Nov 7, 2023 23:14:58 GMT habsui said:

(Side note, listening too much to Fox Business will turn you into a pessimist..)

This is important because many news these days have a political slant.
Letting politics influence investment decisions will lead to money left on the table if not worse.

People who thought Obama would crash the market and the economy paid the price (my neighbors exited the market in 2009 never to re-enter!!! Just WOW).
People who thought Trump would crash the market and the economy paid the price.

Ignore the noise, look at the data (not crumbs carefully selected) and stay the course!

(for me, at 50, that is 40% US stock, 30% foreign stock, 20% bonds, 10% MM at the moment)

[newtecher]

Nov 7, 2023 21:37:42 GMT Karen said:

Nov 6, 2023 15:48:04 GMT newtecher said:

In 2001, S&P increased from 1103 on Apr 4 to 1244 on May 21 (more than 20%). Would you call it a bull market based on your definition?


I think most people would call it a rally in an extended bear market (from March 2000 to July 2002). I do not think there is a strict definition for a bull market (or a recession for that matter) and they are only clear in hindsight. We may well be in an extended bear market since Dec 2021.

Did I define bull market in my post?  No, I did not. 

I very generally defined a bear market in order to point up that what the poster stated was clearly incorrect.

Not sure what you are trying to do here?  Undermine my post?  Discredit me?  By twisting what I posted? 

Or are these honest questions?

If these are honest questions, I'd need to look at past years S&P charts to answer it.  And I'm really not interested in what happened in 2001 or being tested on such. 

Besides, what difference would it make to you or anybody else what I THINK that 2001 market move was?

Here are the widely accepted, general definitions of bull and bear markets, in case you really want to know.
www.investopedia.com/terms/b/bullmarket.asp
www.investopedia.com/terms/b/bearmarket.asp

I certainly am not trying to discredit you. All I wanted to say is that we may still be in bear market. In Oct 2022, the market dropped by more than 20% from the previous peak, making it a bear market. What happened since then is subject to interpretation. It may be a new a new bull market or, especially if the indices make a new low, pretty much everyone will call it a bear market rally.