Historic market rise underway
The recent string of consistent gains is a rare event not seen in nearly 20 years.
The stock market's performance this month has been one for the record books. After May's overenthusiasm, a two-month 6.4% pullback into June's low was all it took to recharge the batteries, clear out extreme sentiment, and clear the way for a run to new all-time highs.
Professional traders loaded up in late June, piling into futures and options contracts that would pay big as the Dow Jones Industrial Average marched towards the 16,000 level and the S&P 500 charged towards 1,700.
Since June 25, the S&P 500 has moved higher 16 out of 19 sessions for a gain of nearly 8%. The two most recent losses were less than 0.4%. Not only have the price gains been consistent, there has been broad participation.
Add it all up, and the evidence suggests the gains will continue.
Returning to price, the folks at SentimenTrader note that the last time stocks posted such a consistent string of gains was back in 1995 (in March and again in September of that year). Six months later, the market was up another 13% on average. A year later, the average gain was more than 22%.
The performance was more mixed for examples in the 1960s and 1970s. So it's not a slam dunk analogue.
As for breadth, performance after a surge like we've seen has historically been more consistently positive. Since 1950, there have been 20 occurrences where market breadth has been as strong as it was in early July. In all 20, stocks were higher a year later by an average of 22%.
Now, to be clear, this is just looking at the market. The economy has its own issues. There are still unresolved structural issues with the government's finances, long-term entitlement obligations, the infrastructure deficit, the hollowing out of the middle class, overreliance on cheap money stimulus, and on and on.
But for now at least, Dow 16,000 and S&P 1,700 look achievable before the fiscal fights return to Washington in September.
Right now, an area of great potential are metals and mining stocks, represented by the Metals & Mining SPDR (XME). With cyclical, economically-sensitive stocks enjoying a surge of buying pressure, the XME is breaking up and out of a long multi-month downtrend.
Digging into the sector, steelmakers -- which have been heavily shorted -- are popping up in a big way. Stocks like Cliffs Natural Resources (CLF), U.S. Steel (X), and AKSteel (AKS) are or look ready to burst out of consolidation patterns on a flurry of frantic short covering. More than 36% of CLF's stock floatation has been sold short. It's 32% for X. And it's 28% for AKS.
I'm adding CLF, X, and AKS to my Edge Letter Sample Portfolio.
Disclosure: Anthony has recommended XME and AKS to his clients.
Check out Anthony's new investment newsletter, the Edge, and his money management service, Mirhaydari Capital Management. A two-week free trial has been extended to MSN Money readers. Click the link above to sign up. Mirhaydari can be contacted at firstname.lastname@example.org and followed on Twitter at @EdgeLetter. You can view his current stock picks here. Feel free to comment below.
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Go back a read the junk you have written. Someone who listened to you would have missed many thousand of points or be trading selling at lows and buying at highs.
Jsut switch the word "Rise" with drop in the title, and you have Anthony writing a couple of weeks ago.
It's all a crapshoot, just look at Jubek's article..
Tony, you should stick to articles like this- simply reporting after the fact. Your predictions are crap!
Remember your first one this year?
Its just Tuesday. We all got to keep to a schedule.
Tony you are a "wrong way Corrigan" for sure! The market is topping out and there have been a few signs of that in the past weeks that you have missed altogether. Consumers are "tapped out" and China, Japan and Europe are all disasters economically. Second half of this year is going to be tough!
right, right...' The recent string of consistent gains is a rare event not seen in nearly 20 years'
and neither was QE1, QE2, and QE3, what does that tell 'ya?? can you imagine if the market gains were due to NATURAL economic recovery without gov't interference?? nuff said.
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Stocks drift lower and bonds are hit as investors await the Fed. Prepare for higher volatility this week.
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