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Bond Stock Gap Is Bullish Signal ... Leuthold Group ... Jim Paulsen

edited April 2020 in Other Investing
“This relatively rare condition of intense stock market fear, combined with a generally calm bond market, has proved to be a powerful combination for ensuing stock market returns,” Paulsen wrote in a note Tuesday.

When the VIX is above the 80th percentile and MOVE is below the 50th percentile, the average annualized S&P 500 price performance has been “remarkable -- at nearly +21% compared to only a little more than +7% the rest of the time,” he said.

In checking the stock futures, about an hour before the markets open, this morning, it looks like the market is set to build on Monday's gains.

The futures ...

Old_Skeet has been a buyer of equites during this downdraft believing that program trading had the markets oversold. It is now nice to see the stock market rebounding since ... as the saying goes ... I caught some falling knives. I'm thinking ... as the 500 Index begins to approach the 2700 to 2800 range things will slow and we will trade off of TTM earnings projected by S&P to be in the $130's. This could take us sideways and in a trading range through summer. Hopefully, though, when fall comes forward earnings will start looking better (possible in the 150's to 160's) and this will set stocks up for a nice fall stock market rally.

Anyway ... this is how I see it.

Take care ... be safe ... and, I wish all "Good Investing."

I am, Old_Skeet

@mcmarasco ... Matt you asked for a signal. Jim Paulsen is one I have followed for years. I have found that his thinking has been pretty much on spot. Hope this helps you sort things out. Anyway, his comments confirmed my thinking. By the way ... my fixed income sleeve took a beating much more than I thought it would. With bond valuations being down I have now begun to buy in the fixed income area of my portfolio.


  • Isn't the calm bond market because of the feds actions of buying everything everyone else doesn't want?
  • @royal4: That sound probable to me. @Old_Skeet: Can you explain what (move) means from your post above.
    ? Thanks ,Derf
  • royal4 said:

    Isn't the calm bond market because of the feds actions of buying everything everyone else doesn't want?

    As I understand it, they can't buy junk until Congress passes a law, and the President signs it. So it will probably get more exciting when some of the investment grade debt out there is rated lower.

  • edited April 2020
    Hi @Derf ... Here is the how the dictionary defines the word "MOVE" and that is to go in a specified direction or manner; change position. This is how I believed Mr. Paulsen intended it use. Anyway that is my take away. Skeet
  • Foomow up articles

    Bonds funds with biggest net outflow ytd

    With coronavirus uncertainties, corp bond etf has poorly performed in recent months. Many are heading toward exisiting doors/ running toward US-T.

    The FEDS however recently backed these vehicles and bought huge junks/ corp bonds. Yields in junks much higher. Think investors maybe having second thoughts now before existing. 3rd/4th quarters may bring much better news and returns if economy recovery maybe taking shape
  • edited April 2020
    Hi guys. I have the S&P 500 Index current up off its 52 week closing low of 2237 (March 23rd) by +22.9% (513 points). According to Mr. Paulsen's thesis I wonder how much near term upside is left?

    I'm thinking from here we drift sideways and become range bound for a while. Should Q1 earnings surprise then perhaps we go higher ... Perhaps, not. For the near term, I feel most of the upside has already been made.

    For me, since I was an active buyer of equities during the downdraft it is now clip coupons and collect dividends, that my portfolio generates, while I await this out.
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