After hitting a low at $126.07 on March 17, SPY has bounced off strongly off those lows. Coincidentally the March lows for the ETF were pretty close to the January 22nd lows at $126. This created a chart formation which most technical analysts out there refer to as a double bottom, which is bullish for stocks.
The second catalyst that made me a big believer that the bottom is in was an article, published in the WSJ, called "Stocks Tarnished By 'Lost Decade'".
Initially, after reading the title, I decided that US stocks have been a terrible performer over the past 10 years. I wished I had bought emerging market funds or commodities ten years ago. But then I remembered that such major headlines always come at major market bottoms. Typically when headlines scream bull or bear a good contrarian strategy is to run in the opposite way.
For example, in August 1979 a famous headline “The Death of Equities” marked a bottom in the US stock market. The S&P 500 rallied over 40% until 1983, when another headline “Rebirth of equities” appeared.
Thus, as long as the SPY does not close below $126, I would be bullish on the stock market. In addition to that, I believe that US stocks would outperform most if not all of the asset classes which it has been outperformed by over the past decade. This includes international stocks, emerging markets and even commodities.
For the past 137 years, US stocks’ annual returns have been negative only 37 times. If history is any guide, I would expect stocks to keep rising 73% of the time. In addition, the average annual gain after a losing year was 11.73% versus a 9.98% return after a winning year.
Related Articles
- SPY at a crossroads
- Diversification Matters
- Dividend Stocks Watchlist
- Dollar Cost Averaging
Saturday, March 29, 2008
Popular Posts
-
I review the list of dividend increases each week, as part of my monitoring process. There were 27 companies that increased dividends over t...
-
I found an interesting paper from S&P Dow Jones on the Dow Jones Dividend 100 Indices. This is the index used behind the popular divide...
-
As part of my monitoring process, I review the list of dividend increases every week. I usually focus on companies that have managed to b...
-
I review dividends increases every week, as part of my monitoring process. I typically focus my attention to companies that have raised divi...
-
Increasing the dividend is a sign of confidence in the business. I study dividend increases every week, and focus my reviews on the companie...
-
I review the list of dividend increases every week, as part of my monitoring process. I usually focus my attention on the companies with a t...
-
Today, I wanted to share the story of Earl Crawley , a parking lot attendant who accumulated a portfolio of dividend stocks worth $500,000, ...
-
One of the best things you can do as an investor is to audit your investment decisions. This is an underrated factor that can help improve ...
-
The NASDAQ US Broad Dividend Achievers Select Index is comprised of a select group of securities with at least ten consecutive years of incr...
-
Bill Gates is one of the founders of software giant Microsoft (MSFT). Before Microsoft went public in 1986, he held 11,222,000 shares in th...
