[Market Outlook] SUPER CELEBRATIONS. The Party Continues

Market Facts Galore. You Won’t Want To Miss These! [Company Logo] SUPER CELEBRATIONS. The Party Continues Market Facts Galore. You Won’t Want To Miss These! By Donn Goodman February 11, 2024 [image] The stock market and the good old American pastime of watching football are thriving this weekend. New all-time highs on the S&P 500 each of these past few weeks is driving investor sentiment readings much higher. We are glad you are with us for this week’s Market Outlook. We hope that you have had a profitable week and will enjoy the weekend. If you are an avid football fan (or Taylor Swift fan) you are probably enthusiastic about watching the big game. For me, I enjoy the brand new and usually funny commercials. I look forward to tuning in to watch the emerging trends that will drive consumers for the next few months. With 200 million Americans watching the big game, it is no surprise that they get an incredible amount of $ for just 30 seconds of air time. Speaking of the Super Bowl, since it is happening later today, here are some fun facts that you may or may not be aware of: - Nearly 68 million Americans are expected to wager more than $23 billion on Sunday’s Super Bowl between the San Francisco 49ers and the Kansas City Chiefs. Both are records. - While some bettors will be satisfied with picking the winner, millions flock to the “prop bets” not directly tied to the game’s outcome. Westgate Superbook in Las Vegas has 500 such bets. - These bets include everything from the color of the Gatorade dumped on the winning coach, the coin-toss, the length of the National Anthem, how long Taylor Swift will be shown on TV, and whether or not there will be a post-game proposal between Travis Kelce and Swift. - One of our investment partners was in Las Vegas on Wednesday and Thursday of this past week. He participated in the Hall of Fame luncheon on Thursday with most, if not all, current hall of fame members. He stayed at Ceaser’s Palace for $99 a night. When he departed, the rooms began at $2,000 a night for a 3-night minimum. Additionally, the betting tables all went to a $100 minimum. That is the power of hosting the Super Bowl in Las Vegas. The Super Bowl Indicator and the Stock Market. The Super Bowl (SB) indicator is a nonscientific barometer of the stock market suggesting that the outcome of the Super Bowl could somehow predict the stock market’s direction for the coming year. However, the idea behind this indicator was tied to the fact that a SB win by the NFL team from the American Football Conference (AFC) will predict a decline (bear market) in the coming year. A win for the team from the National Football Conference (NFC), on the other hand, predicts a rise in the market or a bull run in the upcoming year. How did this come about (you might ask)? Leonard Koppett, a sportswriter for the New York Times, first introduced the Super Bowl indicator in 1978. Up until that point, the indicator had never been wrong. At one point in time, the indicator boasted a more than 90% success rate in predicting the up-or-down outcome of the S&P 500 before the dotcom years (1998-2001). Through 2023, the indicator has been correct 41 out of 57 times for a 72% accuracy. However, over the past twenty years (2004-2023), it has only been correct six times or 30%. Conclusion: As a means of predicting the stock market, the Super Bowl indicator is completely irrelevant. There is absolutely no reason to believe that the winner of a football game could in any way dictate the performance of the stock market. What teams have most dominated the 58 Super Bowls? See chart below: [image] You may notice that my hometown of Cleveland is not represented even once in the above chart. Oh well, as they say here, “there is always next year”. (On Friday, we did win Best Defensive Player of the Year, Coach of the Year, Defensive Coach of the Year, and Comeback Player of the Year…so we have that going for us!) Let’s talk about the really important things now, NEW HIGHS on the S&P 500 index. Yesterday, the S&P 500 index finished above 5,000 for the first time. We have written several times in recent Market Outlook columns ([click here for last week’s column]()) that the stock market (and individual stocks) like round numbers. They are pulled both up (and down in bad markets) to hit round numbers. It is no surprise that the S&P was “pulled” up to 5,000 and beyond. As we have pointed out in the past few weeks, we had expected it. Just as important, the S&P 500 is up 14 of the past 15 weeks, which has not been done since 1972. See charts below: [image] Investors continue to bet on a “soft landing” and a resilient US economy given low unemployment, inflation having come down over the past year and the Federal Reserve’s forecast of several rate cuts during 2024. A positive recent takeaway is that FOOD prices are beginning to come down. This should help ease the burden of the average family having difficulties providing quality food for their families, something we often hear from consumers and surveys about “what is worrying the average worker.” See chart below: [image] The good news for the economy is that wages have been rising and that shows up in the following chart illustrating that the average consumer keeps spending $: [image] Despite the 5,000-point milestone, there’s caution that the S&P 500’s 20% rally since early November may hit a roadblock soon. (more on this in a minute). The Fed kept its main interest rate at a 22-year high for a fourth straight meeting last week, and while officials signaled their openness to cutting them eventually, it won’t happen right away. “The big driver for the rally is the realization that the US economy is unlikely to falter in the way that the average prognosticator had expected,” said Yung-Yu Ma, chief investment officer at BMO Wealth Management. “A better economy, healthy profits, and lower inflation are providing the fuel.” Continued strength in the S&P 500 is making history. - The S&P 500 closed at a fresh record high this week, gaining +1.37%. It’s only had one negative week since the October lows, rising +22% in that time. - This was the fifth straight weekly gain of +1% or more. Since 1950, there have only been 11 other five-week streaks of +1% or more. - The S&P 500 generally continued higher over the next few months, although 1956 and 1987 were notable exceptions. Additional facts and figures on the S&P 500: (more on several of these shortly) First Impressions Matter. In the 40 years since WWII when the S&P 500 was up at least 1.5% in January, its median performance for the remainder of the year was a gain of 13.4% with positive returns 82.5% of the time. In all other years, the S&P 500's median gain was 5.7% with positive returns 66.7% of the time. (Source: Bespoke) Lights Out. The Technology sector’s weighting in the S&P 500 ticked above 30% on 1/24 for the first time since 9/26/00. On the same day, the Utilities sector saw its weighting in the S&P 500 drop to a multi-decade low of 2.17%. Since 1990, the only time the Utilities sector’s weighting dipped below that level was in late March 2000 at the peak of the Dot Com Bubble. (Source: Bloomberg) Does Share Price Matter? In the large-cap Russell 1,000, the 100 stocks that began 2024 with the lowest share prices fell an average of 7.4% in January, while the 100 stocks with the highest share prices rose an average of 2.0%. Additionally, the 41 Russell 1,000 stocks that began the year with a $500+ share price rose 3.2% in January, while the 25 sub-$10 stocks fell 11.0%. (Source: Bespoke) No Breaks. The S&P 500 has now rallied 21.3% over the last 70 trading days without experiencing even a 2% decline from a closing high. Since 1953, there have been 15 other streaks where the index went at least 70 trading days without a 2% decline. One year after those prior 70 trading day periods, the S&P 500 was up an average of 12.7% with gains 87% of the time. (Source: Bespoke) Earnings Beats are Rallying. 72% of the more than 500 companies that had reported Q4 2023 earnings through February 7th reported stronger than expected EPS compared to a historical EPS “beat” rate of 65% over the last ten years. Stocks that beat EPS estimates have rallied more than 2% on the first trading day following their earnings reports this season, or about 50 basis points more than normal. (Source: Bespoke) [image] The takeaway: The current rally is beginning to challenge historical extremes, but as the legendary technician Paul Montgomery once said, “The most bullish thing the market can do is go up.” What happens next? Use the links below to keep reading about - What’s next for the bull run - Surprising sector outperformance - Breadth indicators - A deep die into Small-Caps - The Big View bullets - Keith’s weekly video analysis - [Click here to continue as a free member]( [Click here to continue as a PREMIUM member](=) Best wishes for your trading, Donn Goodman CMO Market Gauge Asset Management [image] Every week we review the big picture of the market's technical condition as seen through the lens of our Big View data charts. The bullets provide a quick summary organized by conditions we see as being risk-on, risk-off, or neutral. The the video analysis dives deeper. Get started here and continue with the links below. Risk-On - 3 of the 4 [key US indices](=) continued to make new all-time highs this week, while IWM put in a new 2024 calendar high, and none of the indices are deeply overbought on either price or RealMotion. (+) - Except for the Dow (DIA) which had a distribution day on Friday, the remaining key US indices all have neutral or positive [volume patterns]() over the past 2 weeks. (+) - [Sector rotation]( is confirming bullish price action with speculative sectors like Semiconductors (SMH) up the most on the week and Risk-Off plays like Utilities (XLU) and Consumer Staples (XLP) leading the way down. (+) - [Alternative Energy]() plays such as Solar (TAN) and Clean Energy (PBW) were strong on the week. (+) - The [McClellan Oscillator](=) has made a positive cross for both the S&P500 and Nasdaq Composite. (+) There's more... Use the links below to keep reading about - What’s next for the bull run - Surprising sector outperformance - Breadth indicators - A deep die into Small-Caps - The Big View bullets - Keith’s weekly video analysis - [Click here to continue to the FREE analysis and video.](=)[Click here to continue to the PREMIUM analysis and video](=). Best wishes for your trading, Keith Schneider CEO MarketGauge P.S. When you’re ready, here are 4 free ways we can help you reach your trading goals… - [Book a call with our Chief Strategy Consultant](), Rob Quinn. 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