Bull Markets Do Not End This Way
It’s good to be in the office all week after taking the little guy to college in Florida part of last week. He has been excited to start for months. And thankfully, Ryan is home for a few weeks so we won’t really be empty nesters until September. Then I can be depressed although Katie said she would continue to pop in to raise the noise level in the house.
When I post comments about my thesis, I get emails back on both sides which I really like. Lately, folks have pushed back on my simple correction at worst forecast. The bears think the bull market is ending and a major collapse is coming. But don’t they always think that?
Recall that all year I have pointed to Q3 as a possible soft patch for the stock market. I lowered my conviction a bit when the market declined 10% in Q1. Now, with most indices at new highs and the foundation full of cracks, a decline still seems possible in Q3. However, it should be limited to 10% and reset the bar for more new highs in Q4 and into 2027.
One of my tried and true indicators is below in the lower panel. It’s the New York Stock Exchange Advance/Decline Line which measures participation. With both the S&P 500 and NYSE A/D at new highs, the stock market should be insulated from anything more than 10% down and lead to a quick recovery. Bulls don’t like this.
Next is a similar indicator which shows the percent of NYSE stocks in uptrends or bull markets. It’s at 61% which is fine. Bulls do not end this way.
On Friday we bought DIA and SSO. We sold QLD, PCY, HACK, some MQQQ and some SNOW.
