Since 1957 the S&P 500 has returned 10% or more in the last two months of the calendar year just five times, including 2020. Historically, these end-of-year surges have suggested good things to come for the market in January, as well as the following year.
We are excited to announce phase three of the Nasdaq Dorsey Wright Model Builder with the launch of Matrix and FSM-based Relative Strength (RS) Testing Service. As part of this launch, we are granting you free access to the service for the remainder of 2020. The tool is designed to help you more easily design, test, implement, and monitor custom models powered by the Nasdaq Dorsey Wright methodology. Please see below for replays of our latest webinar series covering the different aspects of the tool.
11/19/2020: Static Model Builder Demo Replay - Click Here
12/9/2020: Matrix Model Builder Demo Replay - Click here
11/5/2020: FSM Model Builder Demo Replay - Click here
December is usually a strong month for domestic equity markets. We highlighted the Santa Claus Rally last week, a generally favorable, shortened, trading window for investors that bridges into the new year; however, the market’s rally in the last two months is rare. The S&P 500 (TR.SPXX) is up over 14% on a total return basis since the end of October. Since 1957 the S&P 500 has returned 10% or more in the last two months of the calendar year just five times, including 2020, and of the four instances with forward returns (1962, 1970, 1985, and 1998) the month of January saw gains 100% of the time. Furthermore, the following calendar year saw positive returns 100% of the time, with an average and median gain each around 19%. However, if looking at the other tail it is a mixed bag, reducing the “predictive power” of a data observation like this. Since 1957 the S&P 500 has not fallen more than 10% in the last two months of the year, but it has fallen 5% or more on five separate occasions. If looking at the forward returns following those instances, it is not as favorable nor suggestive of forward market performance.
The sample size of the above observation is small, as with most market rarities, but with indicators positioned offensively and breadth present, the weight of the evidence remains positive for risk-on asset classes. For a review of recent studies on elevated market indicators, click the links below:
Positive Trend S&P 500 - Forward market returns after (PTSPX) hits 84%
Positive Trend NYSE - The Percent Positive Trend for the NYSE reached 70% for the first time in almost 8 years.
NYSE HiLo:
Implied Momentum - We typically see this bell curve reside around the 3.6 – 4.2 level yet the most recent (12/30) reading is 4.42 for all stocks tracked on our platform, signifying a moderate skew to the right.
Bullish Percent Small Cap - The Bullish Percent for All Small Cap (^BPSCAP) reached its highest level since December 2016.
