Why For Stock Markets Bulls, Monday Could Be "The Most Important Day"

The holiday-shortened first week of 2018 was the best start to a year for Nasdaq since 2004 with all major indices up every trading day of the year so far.

https://www.zerohedge.com/sites/default/files/inline-images/20180105_eod13_0.jpg

Between the last week of December and the first week in January, Bloomberg reports that the S&P 500 has reversed direction every year since 2011.

 

https://www.zerohedge.com/sites/default/files/inline-images/20180106_stocks.jpg

A possible explanation is the expiration of government policies on Dec. 31.

After 4 trading days, the S&P 500 is up 2.6% year-to-date - that is the best start to a year for the S&P since 2006 (and would have been the best weekly gain in 2017).

Critically though, as Ryan Detrick notes, "since 1950, when the first 5 days are up over 2%, the S&P 500 is higher for the year 15 out of 15 times with an average return of +18.6%. "

So, as Detrick concludes, "if you are bullish, Monday is a big day."

Of course, January is another seasonally strong month, with an average total return of +1.2% (+1.1% price return) since 1928. A positive January has historically led to a positive year 86% of the time (80% on a price return basis), with an average total return of +17% (+13% price return). A down January has led to a negative year 47% of the time (56% on a price return basis) with an average total return of +2% (-1% price return).

“This doesn’t mean the index will go straight up from here, but the economic fundamentals are strong enough to support the stocks,” said Phil Orlando, chief equity strategist at Federated Investors.

“Corporate earnings growth has been solid in the last nine months, we expect another double-digits in the fourth quarter. The party is going to continue.

After setting so many different records last year, SentimentTrader.com's Jason Goepfert  expects 2018 to score even more.

Among them, the major indexes haven’t been more than 5% from a 52-week high for nearly 400 days (more than 450 days if we exclude a single day last June).

https://www.zerohedge.com/sites/default/files/inline-images/20180106_streak.png

There were 3 other time periods that matched what we’re seeing now, and after each of them, the S&P 500 declined more than 7% over a period of 30-40 days.

As Bloomberg concludes, long momentum, a strategy that returned the most since 1999 last year, rose the most in more than two years this week.

“It feels like the late phase of a bull market in which investors are capitulating on their reluctance, and joining the party because they cannot identify any downward catalysts,” said Matthew Litfin, portfolio manager of the Columbia Acorn Fund at Columbia Threadneedle Investments.

“Instead, investors now see lower corporate taxes ahead, global economic growth accelerating, and valuation on ‘post-tax-reform earnings’ that is palatable.”

And remember, Gary Cohn and David Tepper both told you that stocks are not expensive...

Forward P/ETWO

Nope, nothing to see here.

Just ask current Fed Chair Powell...

I think we are actually at a point of encouraging risk-taking, and that should give us pause. Investors really do understand now that we will be there to prevent serious losses. It is not that it is easy for them to make money but that they have every incentive to take more risk, and they are doing so. Meanwhile, we look like we are blowing a fixed-income duration bubble right across the credit spectrum that will result in big losses when rates come up down the road. You can almost say that that is our strategy.

Almost!

 

Comments

Archive_file IH8OBAMA Sat, 01/06/2018 - 23:00 Permalink

I live in San Francisco, this is what’s going on. The following is from a post regarding the founder of iota crypto bagging on (XRB) RaiBlocks:

”He's projecting. With the meteoric rise of rai he knows the people and the market are saying "we're tired of waiting" and they are putting a high price for a solution that works. He is afraid of becoming the redundant one if iota doesn't have progress soon, like VERY soon. You can smell the defensiveness and fear on his post. Rai is capturing the market quickly and as we all know with bitcoin, first mover advantage is everything. Once rai is cemented in the top 5 the only feasible thing that could remove it is exponential improvement, for example rai VS btc transactions. 1000x faster, 1000x more throughput, and completely free. We're at the top and almost nothing can beat those numbers dramatically enough to convince people to move on to a different currency after rai has taken over. 

 

This is THE coin, every exchange will list it, and every trader and investor will come in contact with it when moving money from exchange to exchange. Even if it does not overtake btc, armies of bots will be doing arbitrage with it and btc:rai pairings will always be a stable and liquid market during the 20~ seconds it will take to have btc from one exchange to the another. It will also increase healthy exchange competition by emphasizing their withdrawal fees, rai is free to send so there is no excuse for them to charge ridiculous fees for bitcoin or other withdrawals anymore. Millions will be saved on network fees between traders and exchanges, and it will be glorious. It's going to be universal. First it will start with the exchanges, and then through bigger and bigger businesses as usability improvements such as simpler keys, one click transactions, or clearer UI's are developed. It's exactly what every trader and short term investor has been waiting for.”

RaiBlocks trades on KuCoin now and Binance (in 1 week for Binance). 

XRB

In reply to by IH8OBAMA

Archive_file Bloody Fkn Muppet Sun, 01/07/2018 - 00:48 Permalink

Just getting the word out. I sold all my bitcoin to get into XRB. I’ve never seen your account name, you new? I’ve been here for years.

“RaiBlocks is introducing a brand new block-lattice architecture in which accounts will individually have their own blockchain that creates the lattice and achieves consensus by Proof of Stake (PoS) voting. Transactions are instant, with no fees, and has no limit to the scalability, making RaiBlocks perfect for peer-to-peer transactions. There is no mining, and the amount of power required is miniscule making every day transactions for consumers a reality.

Unlike other cryptocurrencies RaiBlocks assigns every user their own blockchain or account-chain that records the accounts transaction and balance history. Only the account owner may update their chain. A transfer will require two transactions, one to send an amount, and the other to receive.

The biggest advantages to RaiBlocks platform is zero fees, instant transactions, and unlimited scalability.
Currently RaiBlocks supports both an online wallet and a desktop version with plans to release a mobile wallet and light wallet soon. An integrated wallet with the Telegram app is also available.

Users can enjoy instant, secure transactions with unlimited scalability by utilizing the RaiBlocks platform.

In reply to by Bloody Fkn Muppet

Snaffew Archive_file Sun, 01/07/2018 - 08:05 Permalink

let's see....the banks have been chugging along with zirp for well over a decade now....all of a sudden, cryptos come out to "save" the common man.  Cryptos rise in value 3,000 percent in a year's time, a month's time, etc.  That is a lifetime of profits for the banks the traditional way.  All the crypto lovers out there are likely being hoodwinked by the banking system that you so vehemently disdain.

In reply to by Archive_file

wintraiz IH8OBAMA Sun, 01/07/2018 - 04:02 Permalink

It is becoming increasingly obvious that a lot of these articles on ZH are trying to emulate the analysis from Shepwave without giving any of the actual predictions.   For the past year at least everyone has been trying to talk down markets and Shepwave traders on ZH have been the only one to call market moves accurately. 

In reply to by IH8OBAMA

LetThemEatRand Sat, 01/06/2018 - 21:38 Permalink

Given the outright admissions by various Fed members that the Fed 1) intentionally props up the stock market; and 2) has short VIX positions, the people who create charts for purposes of predicting future stock market action by reference to stock market performance in decades past, should be in the bread lines with buggy whip manufacturers.  

new game Dreedle Sun, 01/07/2018 - 08:04 Permalink

simple question:what would you do if you were the fed?

of course you or i would create fiat and buy stocks and bonds to keep the economy from realizing "interest rate reality".

and this can go on for quite some tyme.

i am still not interested.

been there and done that.

it owns your soul.

many other tangible places to park my hard earned money.

and i don't have to be drawn into all the anxiety that goes with owning paper assets that require vigilance and stress.

and the day will arrive when the exit doors will be blocked and everything you got gray hair for will be "poof".

just sayin...

In reply to by Dreedle

inosent Sun, 01/07/2018 - 01:34 Permalink

I miss being able to select how many posts load on the page and sorting with the most recent post at the top. I really don't get how the coders here could've overlooked that. Dear ZH, please reinstate that feature.

Let it Go Sun, 01/07/2018 - 08:15 Permalink

When it comes down to the economy and how it impacts the average American in middle America little has changed during the last year but what we are seeing is an extension by many investors into very speculative investments. In reality not only are we and nations around the world continuing to run huge deficits central banks are still printing money and keeping interest rates artificially low.

A recent note from well-respected investor Jeremy Grantham, who is credited with calling the 2000 and 2008 downturns only added to the market's enthusiasm by informing us on Wednesday to be prepared for the possibility of a near-term “melt-up” but that is only part of the story, more below.

 http://Much Talk About Market Sweet Spot But Nothing Is Really different.html

autofixer Sun, 01/07/2018 - 09:45 Permalink

BTFD?  There are no dips dipshit!  Just keep buying!  Where’s my Easy Button?  Millennials are all going to retire at 35.  Old white guys are dumb, investing is a piece of cake!  I’m a stable genius!