Do the Bulls have it?
Macro Perspectives
We headed into Thanksgiving Day and the long weekend with stocks trading back towards a downward sloping trend line (purple line)...
The green line in the chart is the 200-day moving average - it rolled over in April, and has been declining ever since (i.e. the trend is down). And you can also see, it has contained rallies since.
So, now we're testing this 200-day moving average again.
Will we get a technical breakout into the end of the year? We will see. What we do know, is that the odds are lining up in favour of positive stock performance over the next twelve months.
As we discussed last month, heading into the midterm elections, among the many major influences on markets in this environment, none are bigger than what happened on November 8th.
Midterm elections are historically good for stocks.
How good? Going back to 1950, there has never been a 12-month period, following a midterm election, in which stocks were down.
So, according to history, the probability of a positive return for the stock market one-year after a midterm election is 100%. And the average one-year return following the eighteen midterm elections of the past seventy years was 15% (about double the long-term average return of the S&P 500).
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The latest signal from the model is shown below:
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