This is (not) just like 2009

According to a major investment bank, stocks are trading just like they did during the recovery in 2009.

As noted on MarketWatch, Morgan Stanley shows that the percentage of stocks within the S&P 500 that are trading above their 200-day averages looks just like it did when they emerged out of the financial crisis.

Market breadth stocks above 200-day average vs 2009

In the decades that we've been looking at price analogs (how highly correlated a current period is to the path during other periods), they've proven to be modestly useful. 

The main problem is that it's way too easy to cherry-pick examples based on whatever outlook the analyst wants to convey. That's why we use a transparent methodology, going back as far as history allows, and show every occurrence. 

When we do this with the percentage of stocks above their 200-day moving average, the initial recovery in 2009 doesn't even make the list.

Below, we can see the 4 most recent instances. This is not the S&P 500 we're looking at, it's the percentage of stocks above their 200-day averages, showing the most highly-correlated paths to what we've just seen over the past 40 days.

S&P 500 stocks above 200 day average versus 2009

For the S&P 500 index itself, the most highly-correlated periods showed decent gains, especially longer-term. While it might not be the slam-dunk positive it was if we rely on the 2009 template, it does suggest a modest upside bias long-term.

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We also looked at:

  • A more detailed look at the highest-correlated recoveries in stocks above their 200-day averages
  • Consumers' attitudes about the present are improving relative to expectations about the future
  • Among financial experts, though, present vs future sentiment is still plunging
  • Dumb Money Confidence is getting high for a bear market
  • Fear & Greed is high, too
  • The Nasdaq 100 has almost erased its bear market losses
  • So has the Nasdaq Composite - what usually happens next

The post titled This is (not) just like 2009 was originally published as on on 2020-05-21.

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