1.Momentum Continues to Lead…Winners Keep Winning.

August a Continuation of Trend

Aug 31, 2018

Below we show our decile analysis of S&P 500 gains in August. To construct these analyses, we show how each 10% bucket of stocks in the S&P 500 (50 per bucket) by a given metric performs. In this example, we’ve broken the S&P 500 into deciles based on their percentage change in the first 7 months of the year through July. Over the course of August, performance in the other 7 months was highly correlated to performance this month. As shown in the chart below, the 50 best performing stocks YTD through July were up almost 5% in August, with the 2nd through 5th deciles also performing quite well. The bottom half of the market in terms of YTD performance through July generally didn’t do as well in August. That was most true for the 50 stocks that performed the worst through July, which dropped on average 2.2% in the month of August. Owning winners is often derided by contrarians as a way to underperform, but the decile analysis below is one example of momentum begetting more momentum in financial markets.

https://www.bespokepremium.com/think-big-blog/

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1. 2018 Returns Are Reflective of Dollar Rally.

Nasdaq Dorsey Wright

https://business.nasdaq.com/intel/dorsey-wright/index.html

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1.New Highs are Bullish and Long Waits Between New Highs More Bullish.

Finally

Posted by lplresearch

It took nearly seven months, but the S&P 500 Index finally closed at a new all-time high on Friday. Many clues along the way suggested new highs could eventually come, like strong overall market breadth and excellent earnings growth. Still, the big question now is, what happens next?

“Investors have been patiently waiting for new highs in the S&P 500, even while small caps and technology have been making new highs for months now. Here’s the good news: When the S&P 500 has gone at least six months without a new high, the index has been higher a year after the next new high in 17 out of the past 18 instances, going back to 1950,” explained Senior Market Strategist Ryan Detrick.

As our LPL Chart of the Day shows, long waits between new highs tend to foreshadow strong outperformance in the subsequent year.

https://lplresearch.com/2018/08/27/finally/#more-10551

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1.Small Mid and Large Hit New Highs..

The Interminable Bull

U.S. Investment Policy Committee Notes
by CFRA

Aug. 22: In a classic example of ignoring the headlines and focusing on the bottom line, investors brushed aside seemingly damaging political outcomes and pushed the S&P 500 not only to a record duration, but also a new intraday, all-time high. The question du jour is now, “How long?”

We think bull markets don’t die of old age, they die of fright and are most afraid of recession. However, we don’t see a recession on the horizon, since the global economy is expected to maintain its upward growth trajectory, interest rates and inflation are projected to stay low, and S&P 500 profits are seen adding 10% in 2019 to the near-23% 2018 growth forecast.

Besides, history shows that after a trifecta of all-time highs for the S&P 500, MidCap 400, and SmallCap 600, the 500 was higher in price by an average of 4.8% six months later and up 77% of the time versus the average gain of 4.5%. During all rolling six-month periods, it was up 73% of the time.

–Sam Stovall

www.stockcharts.com

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1.Earnings..Highest Beat Rate and Lowest Miss Rate in 5 Years.

Meanwhile, U.S. based investors continue to benefit from rising corporate earnings.  As of August 16^th, 469 of the S&P 500 Index companies have reported Q2 earnings, of which 370 have beaten earnings (78.89%) and only 73 have missed (15.57%) earnings estimates.  In fact, this would be the highest beat rate and lowest miss rate in the past 5 years and well above the averages over the past five years (69.25% Beat rate and 21.51% Miss Rate).  Also, there are five sectors in which at least 80% of companies has beaten EPS estimates thus far.

Bluestone
Rich Farr, Chief Market Strategist
http://www.bluestonecm.com/

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