What happened last week.
What we're watching for
next week.
[The 1-Minute Market Report is brought to you by Brawndo. It's got what plants crave - electrolytes.]
Ruh Roh. Was that punk employment report a shot across
the bow of this historically long economic expansion?
Ruh Roh
Most of you know that the employment report on March 1 was a real stinker. Was it just a one-off outlier in an otherwise healthy job market? Or was it a shot across the bow, warning of trouble ahead? To get some answers, I spoke with my economist friends and they lean towards the one-off outlier explanation.
Maybe they're right. After all, they are professionals who make a living by analyzing economic trends.
Chart 1. S&P periodic returns.
The market broke its streak of 8 up weeks in a row. It is now up 9.4% year-to-date.
Chart 2. Distance from Key Markers
The next chart reinforces what we saw previously - a market that has rallied sharply off the recent lows but is now taking a breather.
Chart 3 - chart of the week
This chart shows the track of year-over-year returns for the S&P 500. The two red lines are the upper and lower boundaries of the Red Zone. What's the Red Zone? History shows that when the YOY change in the market drops below 5% from above, it's likely to continue its downward path. And once it reaches minus 5% it usually telegraphs a change in sentiment from risk-on to risk-off.
As you can see, the market first went through the upper boundary of the Red Zone last fall, and true to form it continued to fall until it reached -12.5% on Christmas Eve. You can see the powerful rally off of that bottom, but the market remains in the Red Zone. Investor caution is advised.
Final Thoughts
We've had a nice rally in the market. But I'm not yet convinced that we will make a new high before we finally succumb to the next bear market.
I could be wrong, of course, but I follow my models and they are showing increasing risk and diminishing prospects for a new high.
For a full analysis of the probability of a bear market or a new recession, see my Monthly Intelligence Report.
As always, if you like what you see, or have suggestions for improving this recap, leave a comment below, or email me at info@zeninvestor.org
Erik, regarding the YOY S&P 500 chart. Couple of quick questions:
1. Is the YOY based on the trading day of current year to same trading day of previous year? (as opposed to calendar dates) For example, the 23rd trading day of the year compared to the 23rd trading day of previous year?
2. Is it possible to share a longer term chart of this?
Thanks,
Paul
I use trading days rather than calendar days. Let me see if I can find a longer time frame to post.