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As the story goes, in response to rumors about his demise, Twain famously sent a letter to a newspaper informing a journalist that “reports of my death are greatly exaggerated.”
Similarly, discussing the recent rally in stocks, BTIG analysts think many signs are inconsistent with a new bull market, and “reports of the bear’s death have been greatly exaggerated.”
“With the S&P 500 gaining 20% off its October closing lows, the ‘new bull market’ choir has been gaining steam,” the analysts wrote. ”Despite the 20% rally, breadth and credit remain inconsistent with a new bull.”
“While we have seen a modest breadth expansion, cumulative breadth has been unable to clear Feb. highs. The SPX got within 3 points of a 52-week high, yet less than 5% of the index made new 52-week highs. Eight months into a new bull we typically see at least a few readings ~20%,” they said.
The analysts pointed out rallies of over 20% in several bear markets. For example, from 1947-1948, the S&P 500 climbed 24% before hitting new lows in 1949. In 2001, the S&P 500 climbed 21%, before eventually plunging 33%. This happened again in the Dow Jones Industrial Average from 1966 to 1970, and Nikkei experienced four rallies over 34% and three that were over 50% from 1989 to 2003, on the way to losing 80%.
They characterized this year as an “inverse pattern” of 2022.
“As the ‘new bull’ choir gains steam, it’s worth noting how different sentiment is from the end of ’22 when many calls were for a ‘weak first half, strong second half’. Of course, that is essentially what happened last year, and this year has been the complete opposite. It would be fitting if SPX topped after June ’23 FOMC just as it bottomed after June ’22 FOMC.”
