Minutes Digest for Dec 14 2020
Another look at that Russell surge
- Published:
2020-12-14 09:49:41 - Author: Jason Goepfert
Earlier, we saw that the Russell has almost doubled. We got a few questions about how that impacted the S&P. The answer? Not much, but over the next 2-3 months, its returns were pretty subdued, with a poor risk/reward ratio.
If we use a proxy index prior to the inception of the Russell 2000, we can see just how different it performed after almost doubling from a low. Prior to the last 40 years, it was an almost universally positive signal. The dates for some of them are slightly different because this is a proxy index and not an "official" one like the Russell.
That was an even better sign for the S&P.
We tend to put more weight on recent history, so would still give an edge to the idea that a doubling of the Russell in record time is probably a short- to medium-term negative as gains get digested.
Small caps (almost) double
- Published:
2020-12-14 08:55:12 - Author: Jason Goepfert
We looked last week at the Russell 2000's surge above its 200-day moving average. With a continued rise today, it's now up 95% from its low. Below, we can see every time since its inception when it first rose 95% or more off of its prior 52-week low. Those forward 3 month returns are not great.
Overseas and oversold
- Published:
2020-12-14 07:40:55 - Author: Jason Goepfert
Despite what had been relatively minor losses in the index itself, there was a lot of selling in the stocks underlying the German DAX index, enough to push its McClellan Oscillator to -75 even while the index held above its 200-day average. The Backtest Engine shows us that's been a decent setup for sustained gains, which it's trying to kick-start today.
We've seen many times in the past that the Shanghai Composite marches to a different beat, and that's the case here, too. Its Oscillator is also sold, the index is also in an uptrend, but it has been much less reliable as a positive sign of oversold in an uptrend.