The S&P 500 Index SPY, has just staged three days of 1%-plus gains. (The benchmark index is down 4 points Thursday.) The last time that happened was in 2011.
So what happened five years ago after those increases? The stock market took off for significant gains. And what does that repeat mean for 2016? To answer that question, let’s explore the fundamentals and the technical.
First, take a look at two annotated charts, one for 2016 and the other for 2011.
Please click here for an annotated chart of 2016.
Please click here for an annotated chart of 2011.
Fundamentals
Here are the differences between 2016 and 2011.
- On the negative side, in 2016 valuations are much higher than in 2011.
- On the negative side, in 2016 earnings are decelerating; in 2011 earnings were accelerating.
- On the negative side, in 2011 central banks had a lot of arrows in their quivers; now central banks are running out of arrows.
- On the positive side, banking systems across the world are in much better shape in 2016 compared to 2011.
- On the positive side, the probability of a 2008-style event is much lower in 2016 in comparison to 2011.
- On the positive side, the probability of a deep recession is significantly lower in 2016 in comparison to 2011.
Technicals
Here are the similarities and differences in 2016 compared to 2011.
- On the negative side, as shown on the charts, there is only a potential double-bottom formation now, compared to a triple-bottom formation in 2011…Read more at MarketWatch
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