AAII Bull-Bear Spread Signals Bullish Outlook | Duality Research

Despite the S&P 500 at all-time highs, we have just seen the largest 2-week shift in investor sentiment in over a year, according to the latest AAII Survey.

 

 AAII bears outnumber bulls for the first time since late April. 

All that happened after that was a five month win streak. 

Ryan Detrick, November 28, 2024.

Bearish sentiment has surged to its highest level in more than a year, while bullish sentiment has dropped to its lowest point since April. As a result, the bull-bear spread has turned negative. For context, the average AAII bull-bear spread over the past 12 months has been +18.8%.

Duality Research, November 28, 2024.

 

 S&P 500 Election Year Seasonal Pattern 1949-2022. See also [HERE], [HERE], [HERE], and [HERE].

Best Six-Month Stretch for the S&P 500 Begins in November | Ryan Detrick

November through April has historically been the Best Six-Month Stretch, rising 77% of the time for an average gain of +7.1%.

 Best Six Months of the Year.

May through October has historically been the 'Worst Six Months,' rising only 65% of the time, for an average loss of -1.7%. However, this year, investors who "sold in May and went away" missed out on +15.6%, making it one of the strongest 'Worst Six Months.' since 1950. When the S&P 500 rises double digits during its 'Worst Six Months,' the following year has been higher 91% of the time, for an average gain of +13.2%.  

 

We found 11 other times stocks gained double digits from May through October and the next six months did even better, gaining 10 times and up 13.2% on average, well above the 7.1% average seen in all years.

 

November is historically the Best Month of the Year.

 

November is historically a very strong month for stocks. The last time the S&P 500 fell more than 1% in November? 2008. It has been higher 11 of the past 12 years. Best month since 1950, the past decade, and in an election year. The second best month the past 20 years (only July is better).

November, December, and January are historically the Best Three Months of the year for stocks.

Best Three Months of the Year.

The S&P 500 might be up six months in a row soon, but October still has a few more days. But it is already officially up five months in a row. Historically, the year after a five-month win streak the S&P 500 has been higher 28 out of 29 times and up more than 10% on average. 

 

 The fun doesn’t stop just yet, as when stocks gain ten of eleven months (like now) they are higher a year later nine out of ten times and up nearly 15% on average. In other words, this blast of strength we’ve seen isn’t a reason to turn bearish. In fact, it might be a reason to remain in the glass half full camp as we head into 2025.

 

 Up 10 of 11 Months Is Also Bullish.

 

We might be past the beginning of the bull market, but by no means does that mean it is done. Going back 50 years, we found there were five other bull markets that made it past their second birthday. Wouldn’t you know it, the worst any of them did was lasting another three years (which happened twice). 

 

Meanwhile, the average bull lasted eight years and gained 288% when all was said and done. No one knows how long this bull will last, but the bottom line is history says be open to this bull market lasting much longer than probably most expect.
 

 

 

Meanwhile, the average bull lasted eight years and gained 288% when all was said and done. No one knows how long this bull will last, but the bottom line is history says be open to this bull market lasting much longer than probably most expect.

Reference:

Ryan Detrick (October 29, 2024) - Seven Reasons This Bull Market Is Alive and Well.
Ryan Detrick (October 28, 2024) - The Best Six Months of the Year Are Here.

S&P Cycle Analysis - Time and Price Projections Update | Steve Miller

The upcoming week marks the pre-election period, where heightened election anxiety and a significant earnings schedule are expected to drive high volatility. This trend is likely to continue through election day. Historical analysis shows that the September to November timeframe has often been associated with increased risk, frequently leading to substantial market corrections.

 

SPY (weekly bars), the MACD, and the extreme stretch between the 13-week and 89-week 

moving averages, which historically always leads to extended corrections.

 

Stocks have demonstrated remarkable resilience, displaying behavior that can be characterized as extreme. The above weekly chart of the SPY highlights this dynamic, tracking the moving average convergence divergence (MACD) alongside the distance between the 13-week and 89-week moving averages. Currently, the MACD indicates an unusually wide gap between these averages, suggesting a potential correction on the horizon.

 SPY (weekly bars), six-month cycles, three-month cycles.

When such corrections occur, they can be quite severe. Although the market has remained strong, November and December are anticipated to experience downturns due to the current extremes, which could lead to several challenging weeks ahead. Nevertheless, broader analysis suggests that the bull market may extend into 2025 before facing a significant downturn, potentially resulting in years of low or negative returns in the stock market.

 SPY (daily bars) and 21-trading day cycles with projected ideal troughs around 

November 6 (Wed) and December 4 (Wed), with a margin of ±3 trading days.

An examination of the SPY across various timeframes, including weekly and two-hour metrics, reveals a deterioration in the two-hour indicators, often the first sign of an impending correction. Historical examples, such as the market's reaction following the 2016 Trump election, highlight the potential for volatility. On that occasion, the Dow fell nearly 800 points before rebounding. Similar large movements are anticipated in the days leading up to and following this forthcoming election. While signs of a downturn have been expected for weeks, the market continues to set the course, underscoring its ultimate authority.

Reference:
Steve Miller (October 25, 2024) - S&P 500 Cycle Analysis - Time and Price Projections Update (video)

 

 

Hurst Cycles in the S&P 500 — David Hickson, October 9, 2024.

S&P Performance After Back-to-Back Double-Digit Years │ Wayne Whaley

The S&P was up 24.23% in 2023 and, as of October 19th, is up 22.95% in 2024. Barring a 10% correction in the last two months of this year, the S&P is positioned to post back-to-back double-digit years for the 25th time since 1930, which is the starting point of my S&P database.

 

Since 1930, the S&P has had 65 winning years out of 95 (68.4%), with an average annual gain of 7.9%. After back-to-back double-digit years, it has recorded 13 wins and 11 losses, with an average annual gain of 2.9%. Notably, since 1950, January results have been 7-12, with the last four being negative. The nine prior cases highlighted in yellow represent post-election years, where the S&P was 4-5, with an average gain of 1.5%.

There have been three occasions of at least four consecutive double-digit years: 1942-1945, 1949-1952, and five consecutive years during the early phase of the technology revolution from 1995-1999. This does not include the eight consecutive positive years in the 1980s, of which six were double-digit gains. Therefore, there is precedent for the rally to continue, especially if one believes we are in the second chapter of the technology revolution, driven by advances in AI.

Wayne Whaley — October 19, 2024.  

October Highs Are a 90% Bullish Indicator for 5% Q4 Gains | Ryan Detrick

Bulls smile when new highs are made in October, as the fourth quarter has historically seen gains 90% of the time, averaging a 5% return since 1950.

Ryan Detrick — October 10, 2024. 

 

Extended cash targets into Oct 16-17th are 5844-60 at least and then pullback may be brief and only hit 5800. The uppermost target is 5970-6009. We cannot negate that possibility yet but the later in the month it gets beyond Oct 21st or so the lesser the chances of it happening. NQ 100 looks like it will retest the July high in October which is 20971 on the continuation chart for futures with upper resistance at 21200. First resistance is at 20514 and then at 20771 and then 20800. We are keeping 21230 in our back pocket for later in the month, it seems less likely right away and Megacaps seem rather stretched out although they inched through key highs of the week.

 

Barry Rosen — October 9, 2024.

The S&P 500 After the Current Six-Month Pattern | Wayne Whaley

If the S&P doesn’t lose 1.6% on Monday, it will mark the fifth consecutive positive month, following the 4.2% loss in April.

Since 1950, this six-month pattern of one decline followed by five consecutive increases (Down-Up-Up-Up-Up-Up) has occurred 29 times. In 27 of those instances, the S&P was higher 12 months later, with an average gain of 12.8%.

Wayne Whaley — September 29, 2024

Ryan Detrick — September, 2024.

 Ned Davis — September 30, 2024.

Hurst Cycle Analysis for the S&P 500 and NASDAQ: An 80-day cycle low is expected to form in mid-October 

— David Hickson, September 30, 2024.

S&P 500 Stats │ Wayne Whaley

Wayne Whaley (Jan 06, 2024) - The S&P broke a 9 week win streak last week. Normally any pullback in a strong advance will scan out as a buy signal. I posted 8 week advances instead of 9, so as to have +10 data points. The TOY Barometer aficionados will argue that the first week of the year is not just any week.

 

 

IsabelNet (Jan 06, 2024) - Historically, 9-week win streaks tend to be bullish for US stocks, with a median 12.4% increase in value seen a year later since 1950, giving investors good reason to expect a positive year in 2024.

 

 

IsabelNet (Jan 05, 2024) - From January to May of an election year, the performance of the S&P 500 index is often lackluster. However, as the year progresses, the market typically improves and delivers robust performance. 

 

IsabelNet (Jan 05, 2024) - Historically, the average annual return of the S&P 500 index tends to experience a substantial decrease during periods when stocks encounter challenges in the month of January.