• 257 days Will The ECB Continue To Hike Rates?
  • 258 days Forbes: Aramco Remains Largest Company In The Middle East
  • 259 days Caltech Scientists Succesfully Beam Back Solar Power From Space
  • 659 days Could Crypto Overtake Traditional Investment?
  • 664 days Americans Still Quitting Jobs At Record Pace
  • 666 days FinTech Startups Tapping VC Money for ‘Immigrant Banking’
  • 669 days Is The Dollar Too Strong?
  • 669 days Big Tech Disappoints Investors on Earnings Calls
  • 670 days Fear And Celebration On Twitter as Musk Takes The Reins
  • 672 days China Is Quietly Trying To Distance Itself From Russia
  • 672 days Tech and Internet Giants’ Earnings In Focus After Netflix’s Stinker
  • 676 days Crypto Investors Won Big In 2021
  • 676 days The ‘Metaverse’ Economy Could be Worth $13 Trillion By 2030
  • 677 days Food Prices Are Skyrocketing As Putin’s War Persists
  • 679 days Pentagon Resignations Illustrate Our ‘Commercial’ Defense Dilemma
  • 680 days US Banks Shrug off Nearly $15 Billion In Russian Write-Offs
  • 683 days Cannabis Stocks in Holding Pattern Despite Positive Momentum
  • 684 days Is Musk A Bastion Of Free Speech Or Will His Absolutist Stance Backfire?
  • 684 days Two ETFs That Could Hedge Against Extreme Market Volatility
  • 686 days Are NFTs About To Take Over Gaming?
  1. Home
  2. Markets
  3. Other

Similar Markets Lean Bullish Longer-Term (Updated)

Late last summer our Similar Markets Model (SMM) identified 1998 as a market with similar technical characteristics. As it turns out, 1998 was an excellent road map for the last eight months. What is the SMM saying now?

Below is a summary table of the similar markets study described below. We found eighty-one weekly cases with similar historical profiles to the present market. Looking out eight to twelve months, in 89%-91% of the historical cases, the S&P was higher with an average gain between 10.38% (eight months) and 24.57% (twelve months). The risk-reward ratios were favorable looking out on all time horizons, but especially so between three and twelve months.

RR Ratio S&P 500 Index

The SMM compares current daily, weekly, and monthly 80-20 Correction Index values with historical values. The model also identifies periods with similar Bull Market Sustainability Index (BMSI) readings. We ran the model early this morning. The results lean toward favorable outcomes over the next 12 to 36 months.

The periods that were most frequent in terms of similarity to the present day clustered in 1991-1993 and 2004-2006. As shown below, both periods offered very favorable long-term results for investors.

$SPX (S&P 500 Large Cap Index) INDX

We are collecting data for all the periods identified in order to calculate risk-reward ratios for markets similar to what we have today. We will post the results when they are available on Short Takes.

$SPX (S&P 500 Large Cap Index) INDX

It should be noted that mid-October 1987 was identified as one of the similar periods. The '87 crash began on October 5 with a bottom coming on October 19. From a longer-term perspective, October 19 was a good day to invest, but October 5 was a terrible day to commit new capital.

If the situation in Europe can resolve itself in a somewhat orderly manner, it is reasonable to believe in a more favorable environment since Europe has been a drag on the markets for over two years. If the situation in Europe unravels again, it is very difficult to envision bullish outcomes.

 

Back to homepage

Leave a comment

Leave a comment