Title:
Market Analysis: 3 Factors Supporting Bullish Trends Amid Recent Declines – Exclusive Summer Sale on AI-powered Stock Picks!
Article:
Recent market volatility has underscored a familiar truth: fear sells. Negative news often captures more attention than positive, creating a sense of urgency to hit the panic button and sell everything. Even first-time investors have noticed this trend, with sensational headlines often seeking to amplify fears.
Relying solely on news to guide investment decisions can be challenging. To illustrate, consider the historical performance of the S&P 500. The chart below reveals that the average intra-year decline since 1980 is 14.2%. Despite these dips, the S&P 500 has delivered positive annual returns 33 times out of 44 years.
Volatility is an inherent part of investing, and understanding this can help investors stay the course. Keeping that in mind, let’s consider three things investors should know as market correction deepens, and the urge to sell off takes hold.
1. Majority of S&P 500 Stocks Remain in an Uptrend:
The current bullish market, which began from the October 2022 lows and recently rebounded after the 4Q23 pullback, has been marked by concentrated market leadership. While investors hoped for a broader market expansion beyond the Magnificent 7 and mega-cap technology stocks, this summer’s rotation is under question. Notably, 78% of the S&P 500 Index components are currently in an uptrend—a higher percentage than in recent weeks—despite the overall index decline.
2. July’s Market Consolidation Was Healthy:
July’s market performance reflected a typical consolidation phase, with the S&P 500 achieving a 14.4% annualized gain. Over the past month, 9 out of 11 sectors posted gains, with only technology and communications lagging. An intriguing development is the 11.8% performance gap between the NASDAQ 100 and the S&P 500 in July—the largest such disparity on record.
3. Long-Term Bullish Trend Remains Intact:
Currently, the market remains robust, with two-thirds of stocks in a long-term bullish trend, consistently trading above their 50-day and 200-day moving averages. At present, 73.95% of stocks are above the 200-day average, and 64.21% are above the 50-day average—levels that historically signal a strong uptrend.
A significant shift would occur if the percentage of stocks above these moving averages dropped below the 55% to 50% range, which could raise investor concerns. However, the market currently does not exhibit signs of severe distress.
Analysis:
In summary, despite recent declines causing fears of a larger selloff, underlying trends suggest that the market is still in an uptrend. The majority of S&P 500 stocks remain in an uptrend, July’s market consolidation was healthy, and the long-term bullish trend remains intact. This indicates that while some individual stocks may be taking a breather, the overall market is not facing a crisis. Understanding these factors can help investors navigate market volatility and make informed decisions to optimize their finances and investments.