Tuesday , January 26 2021
Home / Lance Roberts Real Investment Advice / Markowski: Sentiment Anomalies & Market Downturns

Markowski: Sentiment Anomalies & Market Downturns

Summary:
Market Sentiment Anomalies And Historical Market Downturns. The two stock market sentiment anomalies have increased the probability of a correction near term. The two anomalies are: Thanksgiving Melt Up Anomaly. The average S&P 500 gain for 12 of the past 14 ten-day periods concluding November, was 3.5%. The only two exceptions, 2015 and 2018, were preceded by significant market corrections. Bullish Sentiment Anomaly. Currently, there is a high probability for the S&P 500 to decline by 12.7%. Such would be from its recent 2020 high and would conclude by December 20, 2020. Based on the previous behavior, there is a 66% probability the S&P 500 could continue its decline in 2021. The Thanksgiving Melt Up Anomaly is now driving the S&P 500 to a higher November all-time high.

Topics:
Lance Roberts considers the following as important:

This could be interesting, too:

Barry Ritholtz writes Stimulus, More Stimulus and Taxes

Lance Roberts writes The Next Decade Will Likely Foil Most Financial Plans

Guest Author writes Markowski: S&P At 3rd Perilous High Since 1871

Lance Roberts writes Bulls Continue To Push Stocks Higher As Risk Rises 01-22-21

Market Sentiment Anomalies And Historical Market Downturns.

The two stock market sentiment anomalies have increased the probability of a correction near term.

The two anomalies are:

  • Thanksgiving Melt Up Anomaly. The average S&P 500 gain for 12 of the past 14 ten-day periods concluding November, was 3.5%. The only two exceptions, 2015 and 2018, were preceded by significant market corrections.
  • Bullish Sentiment Anomaly. Currently, there is a high probability for the S&P 500 to decline by 12.7%. Such would be from its recent 2020 high and would conclude by December 20, 2020. Based on the previous behavior, there is a 66% probability the S&P 500 could continue its decline in 2021.

The Thanksgiving Melt Up Anomaly is now driving the S&P 500 to a higher November all-time high.

The Bullish Sentiment Anomaly is the cause of a violent correction for the S&P 500 to begin in early December 2020.

The chart below depicts the four 45% to 59% Bullish sentiment readings which occurred near the all-time highs for the S&P 500. (2018 to November 13, 2020)

Markowski: Sentiment Anomalies & Market Downturns

Markowski: Sentiment Anomalies & Market Downturns

Looking For A Short-Term Decline

Within five weeks of the three prior Bullish Sentiment Anomalies occurring, the S&P 500 declined by a minimum of 9.7%. Two of the three total declines depicted in the table below were more than 100% greater than the five-week drops.

Markowski: Sentiment Anomalies & Market Downturns

There exists a risk of decline from November 13, 2020, through Christmas Day. Such is likely to occur precisely because no one expects it to. 

Trade accordingly.

Markowski: Sentiment Anomalies & Market Downturns


Michael Markowski has worked in the Capital Markets since 1977. He spent the first 15 years of his career in the Financial Services Industry as a Stockbroker, Portfolio Manager, Venture Capitalist, Investment Banker, and Analyst. Since 1996, he has worked in the Financial Information Industry and has produced research, information, and products that have been used by investors to increase their performance and reduce their risk. Read more at BullsNBears.com.

Lance Roberts
Lance Roberts has sharpened that lens with 30 years in the investing world from private banking and investment management to private and venture capital. Lance Roberts’ perspective and common sense analysis is sought after by media outlets such as Fox 26 News in Houston, CNBC, CNN and Fox Business News along with numerous publications including the Wall Street Journal, USA Today, Reuters and the Washington Post. Roberts is the Editor of the X-Factor report and publishes the blog Daily X-change.

Leave a Reply

Your email address will not be published. Required fields are marked *