It’s a Bull Market

By Graham Summers, MBA | Chief Market Strategist

A raging debate is taking place between the bulls and the bears.

That debate?

Whether the lows are in… or if stocks are about to roll over and retest the lows or even break down the new lows.

Unfortunately for the bears, or anyone else who has missed the rally thus far, history and multiple metrics point to THE lows being in.

First and foremost, the S&P 500 completed a nine-session win streak two Fridays ago. The financial media likes to claim that this kind of win streak only occurs in the context of recessions, but that is simply not true.

As Ryan Detrick has noted, since 1928 there have been 29 instances in which stocks closed up nine days in a row. Only THREE of them occurred in the context of recessions. So, the odds greatly favor recent price action being bullish, NOT bearish.

Secondly, the month of April saw an incredible swing in prices that ended with a VERY bullish development. At their lowest, stocks were down over 11% for the month. However, because of the incredible rally into month-end, the S&P 500 ended April only down 1%.

This massive swing in momentum from being sharply down to sharply up triggered a Zweig Breadth Thrust (ZBT), an EXTREMELY rare and EXTREMELY bullish development.

If you’re unfamiliar with ZBTs, one is triggered when the percentage of advancing stocks on the New York Stock Exchange (NYSE) increases from below 40% to above 61.5% within 10 trading days.

There have only been 16 ZBT signals since 1957. Every single time, the stock market has been higher both six and 12 months later. Here again, this strongly suggests THE lows are in and a major bear market is not about to unfold.

We also must consider sentiment.

According to the American Association of Individual Investors (AAII) weekly survey, more than 50% of investors were bearish on stocks for 11 weeks straight up until this week. That is HIGHLY unusual as historically an average of only 31% of investors are bearish at any given time.

Indeed, 11 straight weeks of more than half of investors being bearish on stocks is an EXTREME reading. Since its inception in 1987, the AAII weekly survey has never seen such an extreme streak of bearishness. Not during the Tech Crash, not during the Great Financial Crisis, and not even during the pandemic has this great a percentage of investors been bearish on stocks for this long.

This is the kind of sentiment you see at major market bottoms, NOT at the start of new bear markets. So here again, the odds greatly favor that THE lows are in, and stocks will move higher.

Finally, peak to trough, stocks declined 18.9% from the February highs. This is what you would call a “bear market” or “near bear market” (Wall Street views a bear market as being a 20% decline).

As I write this, the S&P 500 has recovered more than HALF of that decline. Since 1956 there have been 16 instances during which stocks staged a bear or near bear market decline and then recovered half of the drop. In only one instance did stocks make new lows after recovering half of the initial decline. But in EVERY instance, stocks were higher a year later. (h/t Ryan Detrick). And not by a little, by an average of 18%!

Add it all up, and you’ve got:

1. A nine-day win streak: a rare and historically bullish signal (89% of the time).
2. A Zweig Breadth Thrust (ZBT) which has a 100% track record for stocks being higher six and 12 months later.
3. The kind of extreme bearish sentiment typically associated with major bottoms, not the start of new bear markets.
4. Stocks recovering half of a bear/near bear market decline, which has a 100% track record for stocks being higher a year later with an average gain of 18%.

Like I said at the start of this article, it is HIGHLY likely that THE lows are in. This is not to say that stocks will go straight up from here, but that the overall trend is now UP.

And while stocks should do well in general, certain companies will produce extraordinary gains due to their being A) high growth and B) unaffected by the trade war/ increased tariffs.

We detail four such companies in a Special Investment Report Tariff Proof Stocks: four high growth companies unaffected by the trade war.

As I write this ALL FOUR of them just hit new all-time highs.

Normally this report is only available to our paying clients, but in light of what’s happening in the markets today, we are making just 99 copies available to the general public.

To pick up one of the remaining copies…

CLICK HERE!

Graham Summers, MBA

Chief Market Strategist

Phoenix Capital Research

By Graham Summers, MBA | Chief Market Strategist

The stock market is about to trigger a “SELL” on its monthly MACD.

If you’re unfamiliar with the MACD is stands for moving average convergence/divergence. It’s a technical indicator that is used to monitor momentum in the stock market.

The way it works is quite technical, so to keep things simple here, you can think of the MACD as illustrating when short-term momentum shifts versus the long-term trend in the stock market. When short-term momentum breaks down against the long-term trend, it signals a “sell,” and when short-term momentum breaks out to the upside against the long-term trend, it signals “buy.”

In a nutshell, the MACD is a fantastic means of catching MAJOR market turns. You can apply it to any time frame: hourly, weekly, even monthly. But when you use it on a monthly chart, it’s one of, if not THE best means of timing bull and bear markets.

Let me show you.

The below chart shows the S&P 500 and its monthly MACD back in 2022. The short-term momentum indicator is represented by the black line in the lower box. And the longer-term trend is represented by the red line.

As you can see, the black line broke below the red line in early 2022, signaling that short-term momentum was breaking down against the longer-term trend. This was a SELL signal.  And sure enough, what followed was a 12-month bear market that saw stocks lose almost 30%!

Anyone who noted the “Sell” signal in early 2022 and moved to the sidelines avoided a WORLD of pain.

So, what is the Monthly MACD saying now?

It’s right on the verge of signaling another SELL signal. This is a MAJOR warning to stock market investors that stocks are in VERY serious danger of entering another MAJOR bear market.

If you’ve yet to prepare for this, the time to act is NOW before the bear market hits.

Indeed, our proprietary Crash Trigger is now on red alert. This trigger went off before the 1987 Crash, the Tech Crash, and the 2008 Great Financial Crisis.

We detail this trigger, how it works, and what it’s saying about the market today in a Special Investment Report titled How to Predict a Crash.

Normally this report is only available to our paying clients, but in light of what’s happening in the markets today, we are making just 99 copies available to the general public.

To pick up one of the remaining copies…

CLICK HERE!

Graham Summers, MBA

Chief Market Strategist

Phoenix Capital Research

By Graham Summers, MBA | Chief Market Strategist

The Fed is refusing to cut interest rates because President Trump’s proposed tariffs might trigger inflation.

Yes, this is the Fed’s thinking. They’ve even admitted that Fed staff are assuming “full retaliation” for whatever tariffs the Trump administration introduces.

What are these people smoking?

What country is going to try to retaliate against the U.S., thereby losing access to the largest pool of middle-class consumers in the world? The U.S. economy is as large as the 2nd, 3rd and 4th largest economies combined… and 75 of U.S. GDP is consumer spending.

That’s $21 TRILLION in consumer spending per year.

And yet, the Fed believes that the current trade war is only going to get worse, with other nations engaging in full retaliation to whatever the Trump administration proposes. And because of this, the Fed is worried that there might be an uptick in inflation.

Never mind that the gold standard for inflation expectations shows inflation is ~2% and trending down.

Never mind that real-time inflation measures like Truflation show inflation is actually BELOW 2%.

The Fed knows better! After all, they have 400 Economics PhDs on staff. And those people are all really smart!

This is a MAJOR screwup, and it’s only a matter of time before the Fed breaks something. When this happens, the Fed will be forced to panic ease monetary conditions triggering one of the greatest wealth building opportunities in years. 

To start receiving these kinds of actionable insights, join 56,000 readers in over 56 countries in receiving our daily market alert every weekday before the markets open (9:30AM EST).

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Best Regards

Graham Summers, MBA

Chief Market Strategist

Phoenix Capital Research

By Graham Summers, MBA | Chief Market Strategist

The Fed SHOULD have cut rates last week.

That is a fact.

Instead, the Fed stated it is on “hold” for rate cuts because the potential tariffs the Trump administration introduces might trigger inflation.

This is 100% nonsense.

Europe, Japan, China, and countless other nations have introduced tariffs, duties and other trade restrictions in the past with ZERO uptick in inflation.

Moreover, there is NO evidence that inflation expectations are on the rise. The five year forward inflation expectations is THE gold standard for measuring inflation expectations.

Do you see an uptick here? I don’t.

So what is the Fed doing?

Playing politics.

They did this during Trump’s first term in 2018 when they intentionally tightened monetary policy to the point of triggering a stock market crash (if you don’t believe me, former Vice Chair Stanley Fischer admitted this in an interview).

This is a MAJOR screwup, and it’s only a matter of time before the Fed breaks something. When this happens, the Fed will be forced to panic ease monetary conditions triggering one of the greatest wealth building opportunities in years. 

The last time the Fed screwed up and was forced to change course was in 2023 when it blew up the regional banking system. What followed was an almost 1,000 point rally on the S&P 500.

To start receiving these kinds of actionable insights, join 56,000 readers in over 56 countries in receiving our daily market alert every weekday before the markets open (9:30AM EST).

Subscribe to Gains Pains & Capital!

Best Regards

Graham Summers, MBA

Chief Market Strategist

Phoenix Capital Research

By Graham Summers, MBA | Chief Market Strategist

Yesterday, I noted that the S&P 500 has a clear Head and Shoulders pattern. As a result of this, the bears were convinced that a top was in.

Unfortunately for them, investing is rarely easy or obvious. And everyone and their mother saw that pattern forming. Thus, the odds of it actually working out in their favor were slim.

Sure enough, stocks exploded higher yesterday. And by the look of things, the S&P 500 will retest its former highs if not establish new all-time highs shortly.

High yield credit typically leads stocks. It is roaring higher after putting in a series of higher highs and higher lows. Based on this alone, the S&P 500 should be over 6,000 already.

Indeed, Senior Loans, which also lead equities are already at new all-time highs. This is NOT bearish. If anything it indicates the financial system is in an aggressive risk on framework.

Put simply, the pullback of the last two weeks was a MAJOR “buy the dip” opportunity. We had our clients ready to profit from it with specific downside targets at which to buy multiple new trades.

Come join us!

To start receiving these kinds of actionable insights, join 56,000 readers in over 56 countries in receiving our daily market alert every weekday before the markets open (9:30AM EST).

Subscribe to Gains Pains & Capital!

Best Regards

Graham Summers, MBA

Chief Market Strategist

Phoenix Capital Research