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What is investors’ worst enemy? Banking crisis? War? Rising interest rates? Inflation?
I don’t think it’s any of the above. We’ve essentially seen all of them in the past year, yet stocks haven’t gone anywhere for 10 months.
Here’s an interesting chart: S&P 500 performance over the past 11 months. The blue lines highlight the monthly closing levels for January (2 month ago), November (4 month ago) and May (10 month ago).
The percentage change, or rate of change (ROC), for the past 2, 4, 10 months has only been 1.20%, 1.28%, 2.53% (as of yesterday’s close). That’s a tiny range over multiple time frames!
When we zoom out, it’s not surprising that this trading range is occurring near the center line of a massive 14-year trend channel and that this – and I’m just eyeballing – is probably one of the biggest – even not the biggest – trading range of the 21st century.
Let’s forget about eyeballing things and look at it purely rules based. Going back to 1957, I was wondering how many other periods showed a similar tiny 2, 4, 10 month rate of change (ROC).
There were only 5 other times, that’s pretty rare. When looking at the S&P 500 forward returns following those 5 precedents, I noticed an interesting pattern.
This pattern was discussed in yesterday’s Profit Radar Report update (you can test drive it here).
If you’ve been reading this newsletter, you know that updates have been sparse with no directional predictions. I even admitted the vague nature of my forecasts due to the conflict among indictors, but I also stated that: “I am fairly certain that any upcoming losses will be erased again.”
That just happened again on a short-term time frame, and it likely still applies to a longer-term time frame.
The media is only interested in capturing your eyeballs and monetizing your clicks … and they will do anything to get your attention (including outrageous headlines), which in turn may result in poor investment decisions.
I simply speak the truth based on the weight of evidence, even if it’s boring and infrequent.
If you see the benefits of this approach and appreciate purely fact based research, sign up for the Profit Radar Report.
The Profit Radar Report comes with a 30-day money back guarantee, but fair warning: 90% of users stay on beyond 30 days.
Barron’s rates iSPYETF a “trader with a good track record,” and Investor’s Business Daily writes “Simon says and the market is playing along.”