Bull Market Could Last Several More Years

By: Chris Ciovacco | Mon, Dec 23, 2013
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Fundamentals And Technicals Align

Before we examine how long bull markets can last, it should be noted the bulls have the fundamental and technical stars aligned for a year-end rally in stocks. From a probability perspective, the best time to invest is when charts and economic reports agree.

Fundamentals and Technicals

Last week, we outlined the importance of fundamental perception, since it sets asset prices. The International Monetary Fund provided another reason for economic perceptions to improve. From Bloomberg:

"The positive assessment the IMF gave with regard to U.S. growth corroborates the improving economic indicators we have been witnessing the last two months in the U.S.," said Konstantin Giantiroglou, head of investment advisory at Neue Aargauer Bank in Brugg, Switzerland. "The sentiment going into Christmas and New Year is good. We have an improving global economy and for the first time since the financial crisis we should see a synchronous recovery."


Before And After Fed

This week's stock market outlook video compares the health of numerous markets, sectors, and risk-on/risk-off ratios before and after last week's Fed announcement. The analysis points to bullish set-ups as we head into year-end.

After you click play, use the button in the lower-right corner of the video player to view in full-screen mode. Hit Esc to exit full-screen mode.


Bull Is Long In Tooth, Right?

There are a lot of bright minds interacting on Twitter, which often leads to some interesting discussions about bull and bear markets. This morning, the tweet below sparked one of those healthy discussions (names removed to protect the innocent).

Tweet


A Longer Than Average Bull Market

There is nothing wrong or inaccurate about the tweet above, stating the typical bull market lasts four years. History tells us the current bull market is in "above average length" mode. However, as noted below, how do investors use those stats?

Tweet


Twelve Years With No Bear

If we bailed on the bull market after four years of gains in 1992, we would have missed one of the greatest moves in stock market history.

$SPX S&P 500 Large Cap Index


1987 - Only A Third Of The Way Home

The chart above sparked the following observation from Michael Santoli, senior columnist for @YahooFinance, frequent CNBC contributor, and longtime Barron's writer:

Tweet


Assume We Sold After Four Years

A long-term bull market began in 1982. If we sold at the end of 1986 (after four years of gains), we would have missed an additional 507% gain. The 507% is based on the S&P 500's move between 12/31/1986 and 12/31/1999 (see points A and B below).

$SPX S&P 500 Large Cap Index


Investment Implications

The moral of the story is no one knows how long the current bull market will last, and nothing says it has to follow any historical path. The current bull market will last as long as it lasts. Rather than being distracted with predictions, our strategy remains the same.

Tweet

If you want to shed some statistical light on the difficulty of stock market forecasting, see this video clip comparing football handicapping to stock market forecasting.

Apple inks deal with China


Apple Assists With Improving Economic Perception

As noted in last week's article, our market model increased our exposure to stocks both Thursday and Friday, based on improvements in the market's tolerance for risk. We continue to focus on market leading sectors, such as technology. The Apple news over the weekend should give a boost to our NASDAQ 100 shares (QQQ). From USA Today:

Apple has reached a long-awaited deal to bring iPhone to China Mobile, world's biggest phone carrier. The companies announced a multi-year deal, to begin selling the iPhone 5s and iPhone 5c in China on Jan. 17. Pricing was not announced. Apple shares will likely rise based on the deal and could help drive earnings per share through 2014, says Brian Marshall, an analyst with International Strategy & Investment Group. "The deal is long-anticipated but finally announced," he says. "We think it's a big deal."

Our model moved back to a nearly fully-invested stance last week. Given the bullish alignment of the charts and recent economic data, it would not be surprising for the "nearly" to be removed from the previous sentence as early as Monday. We continue to hold our stakes in U.S. stocks (VTI), financials (XLF), technology, small-caps (IWM), Europe (FEZ), and emerging markets (EEM). This bullish allocation will be maintained as long as the market allows; that may be for several years or just a few more weeks. The good thing is if we pay attention with an open and flexible mind, we can adjust to either scenario without ever making or relying on a prediction.

 


 

Chris Ciovacco

Author: Chris Ciovacco

Chris Ciovacco
Ciovacco Capital Management

Chris Ciovacco

Chris Ciovacco is the Chief Investment Officer for Ciovacco Capital Management, LLC. More on the web at www.ciovaccocapital.com.

All material presented herein is believed to be reliable but we cannot attest to its accuracy. Investment recommendations may change and readers are urged to check with their investment counselors and tax advisors before making any investment decisions. Opinions expressed in these reports may change without prior notice. This memorandum is based on information available to the public. No representation is made that it is accurate or complete. This memorandum is not an offer to buy or sell or a solicitation of an offer to buy or sell the securities mentioned. The investments discussed or recommended in this report may be unsuitable for investors depending on their specific investment objectives and financial position. Past performance is not necessarily a guide to future performance. The price or value of the investments to which this report relates, either directly or indirectly, may fall or rise against the interest of investors. All prices and yields contained in this report are subject to change without notice. This information is based on hypothetical assumptions and is intended for illustrative purposes only. THERE ARE NO WARRANTIES, EXPRESSED OR IMPLIED, AS TO ACCURACY, COMPLETENESS, OR RESULTS OBTAINED FROM ANY INFORMATION CONTAINED IN THIS ARTICLE.

Ciovacco Capital Management, LLC is an independent money management firm based in Atlanta, Georgia. CCM helps individual investors and businesses, large & small; achieve improved investment results via research and globally diversified investment portfolios. Since we are a fee-based firm, our only objective is to help you protect and grow your assets. Our long-term, theme-oriented, buy-and-hold approach allows for portfolio rebalancing from time to time to adjust to new opportunities or changing market conditions.

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TRUE MONEY SUPPLY

Source: The Contrarian Take http://blogs.forbes.com/michaelpollaro/
austrian-money-supply/