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(7/23/16)
Back in early October a Breadth Thrust occurred based on
Advance/Decline data. Since World War 2 these signals have been
rare. Also notice there has never been a negative return 6 months later or
even in the 12 month period following one of these signals. In fact
the Average 6 Month Return has been 16% while the Average 12 Month Return has
been 24%. With the last signal there was only a 2.3% gain in the S&P
500 which was has been the lowest 6 Month Return since the early 1940's.
Breadth Thrust Signals since the early 1940's
| Signal |
# |
Closing |
6 Months |
6 Month |
12 Months |
12 Month |
| Date |
|
Price |
Later |
Return |
Later |
Return |
| 12/8/1943 |
1 |
11.50 |
12.25 |
6.5 |
13.09 |
13.8 |
| 2/3/1945 |
2 |
13.65 |
14.68 |
7.5 |
18.71 |
37.1 |
| 3/8/1949 |
3 |
14.89 |
15.41 |
3.5 |
17.19 |
15.4 |
| 7/21/1950 |
4 |
17.59 |
21.41 |
21.7 |
21.88 |
24.4 |
| 7/11/1962 |
5 |
57.73 |
64.85 |
12.3 |
69.75 |
20.8 |
| 11/5/1962 |
6 |
58.35 |
70.03 |
20.0 |
73.45 |
25.9 |
| 12/3/1971 |
7 |
97.06 |
109.73 |
13.1 |
119.10 |
22.7 |
| 10/10/1974 |
8 |
69.79 |
83.77 |
20.0 |
88.21 |
26.4 |
| 1/3/1975 |
9 |
70.71 |
94.36 |
33.4 |
90.90 |
28.6 |
| 8/20/1982 |
10 |
113.02 |
148.00 |
31.0 |
163.97 |
45.1 |
| 8/3/1984 |
11 |
162.35 |
178.63 |
10.0 |
191.48 |
17.9 |
| 5/24/2004 |
12 |
1095.41 |
1181.76 |
7.9 |
1194.07 |
9.0 |
| 3/18/2009 |
13 |
794.35 |
1068.30 |
34.5 |
1165.83 |
46.8 |
| 10/14/2011 |
14 |
1224.58 |
1370.26 |
11.9 |
1461.05 |
19.3 |
| 10/18/2013 |
15 |
1744.50 |
1864.85 |
6.9 |
1886.76 |
8.2 |
| 10/7/2015 |
16 |
1995.83 |
2041.91 |
2.3 |
? |
? |
|
|
|
Avg Return |
16.2 |
Avg Return |
24.1 |
Meanwhile one may ask why I didn't issue a Long term Buy Signal
in early October when the latest Breadth Thrust occurred. At the time the
Inflation Adjusted S&P 500 was at the top of its longer term upward channel
(red line) as shown below. Also notice this was the first time a Breadth
Thrust has occurred at the top of the upward channel. Thus I thought this
might end up being a bad signal and lead to a longer term loss.
Although there was additional follow through in the S&P 500
for 4 weeks after the early October signal (points a to b) this was then
followed by a sharp sell off of 14% (points b to c). Thus at the time it
looked like it was a wise decision not to go long in the market. But here we are
9 months later with the S&P 500 making new all time highs once again.
Amateur Investors
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