The 50% move in the S&P 500 has exhibited many of the characteristics of a secular bear market rally:
- It has been on declining volume.
- It has been very low quality in terms of asset gains.
- There is very little real leadership outside of technology names.
- And perhaps most importantly, the move has been very swift.
You’re probably asking yourself how a 6 month 50% move in the S&P 500 can be described as “swift”. Well, you have to study the underlying characteristics of the actual rally. Nearly all of this move occurred in two different multi-week spans. The first of course, was followed by the March 9th bottom. The short-term moving average in the chart below shows just how extreme the move was. Between March 9th and April 1st the market soared 27%. Between April 1st and July 8th the market was up less than 5%. But then, just before Q2 earnings the market once again shot higher by almost 15%. If you weren’t invested in the market during these 6 (out of 20) weeks you barely covered your transaction costs! Most importantly, readers of TPC were tipped off about both moves in advance (see here and here….)
Also alarming in this big move has been the volume. There has been waning participation since the day the rally started. The chart above shows the extreme decline in participation.