The market should continue to surprise to the upside - October 14

10-yr bond yields are rising again after bottoming at depression levels.   Breadth hit extreme low limits last week. Sentiment hit extreme low limits recently.  The market is up 7-days out of 9-days since we made the 1099 low.   VIX has fallen more than 40% after the recent-low of 1099.  The market was up more than 1.75%, 3-days in a row after the low.  Today, Friday, the S&P 500 broke the old recent-high of 1219 on 31 August and that gets the S&P out of its trading range.  All of these are indicators that 1099 was a major low.   Bottom line: the market should continue to surprise to the upside. 

While we may still have a recession, and some think we are already in one (or we never got out of the last one), it appears that the market now is convinced that the risks to earnings were overstated and that the end of the world won’t be this week, or even this quarter.

Now here is a thought for Government employees who are invested in the TSP (the Government employee 401k).  After a significant bottom, especially due to recession or economic slowdown, small-cap stocks will typically outperform large caps on the way up.  The following chart compares the TR Price Extended Equity fund (it is basically the S-fund) vs. the S&P 500 for the past year.  So a strategy is to invest in the S-fund until the spread between the S-fund and the C-fund maxes out and begins to get smaller; then switch to the C-fund.

The Navigate the Stock Market analysis is BUY again today.

I bought back into the stock market at S&P 500 1155 on 7 Oct after the 6 Oct NTSM buy signal.

I am 100% long in the long term portfolio (100% stocks in the 401k.) and 100% long in the trading portfolio.  (See the page “How to Use the NTSM System” – the link is on the right side of this page).