CONVERTING THE BULLS

By Adam O’Dell, CMT
Chief Investment Strategist, Dent Research

U.S. markets were closed on Friday and European markets were closed on Monday. 

With a bit less trading volume, stocks seem to be taking a break from printing higher prices after six consecutive weeks of gains.  The trouble is, we’re still in a directionless market. U.S. stocks have gone nowhere but sideways since late 2014!

I’ve said before that conservative, long-term investors are great at ignoring the market’s short-term twists and turns. But when these investors open up one quarterly portfolio report after the next, only to discover they’ve made no progress, they eventually start to get antsy.

CONSIDER THIS

The S&P 500 was trading at 2,030 this morning.  It was also trading at this price on each of the following dates:

  • January 4, 2016
  • December 3, 2015
  • November 12, 2015
  • October 22, 2015
  • August 20, 2015
  • July 8, 2015
  • May 7, 2015
  • April 6, 2015
  • March 6, 2015
  • February 11, 2015
  • December 31, 2014
  • November 28, 2014

The point is, even an infrequent review of one’s stock portfolio has been agonizing over the last 18 months.  Stocks have made no forward progress!  And 18 months of malaise is long enough for even the most patient investor to begin getting frustrated.

IT COULD GET EVEN WORSE FROM HERE

Deutsche Bank wrote a note over the weekend warning investors that the market might continue chopping sideways until the U.S. Presidential Election is decided, in November.  If that happens, it would make for one of the longest stretches of sideways price movement in stock market history.  If that doesn’t convert some stubborn bulls into bears, we don’t know what will.

Of course, we think it could be worse still, and we’re preparing our portfolio for a rocky, bearish-leaning market.