Getting Ready For A Stock Rally: Why Stocks May Be Past The Worst For A While

It’s more likely than not that the stock market has hit bottom.

In fact, it may have happened a few weeks ago, new research states.

“Odds that the S&P 500 put in a low on June 17th continue to stand at 60%,” according to a recent report from New York-based Macro Risk Advisors (MRA.)

In other words, the chances are that the SPDR S&P 500 ( SPY ) exchange-traded fund, which tracks the S&P 500 index, is more likely to continue climbing than it is to descend into a long-term downtrend.

Things are already off to a good start. Over the the month through Thursday the index has gained 6.7%, according to data from Yahoo Finance.

However, MRA says the market needs to show something more before its confident we are well on the way to resuming the bull market in stocks. The reports explains the situation as follows:

  • “The breadth thrust from historic oversold conditions was the first time we have seen panic selling turn to panic buying but more work needs to be done before we can build more confidence in the market.” (MRA’s emphasis.)

Specifically what MRA analysts want to see is another day went 90% of stocks saw gains, or where at least half of stocks hit their highest level in four weeks. That “would almost seal the deal,” the report states.

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Still, the trend back to S&P at 4200 is in place for the summer although a pullback to 3900 isn’t ruled out, the MRA report states. S&P 500 futures contracts were recently fetching around 4100, which means there’s a potential 2.4% gain over the next few weeks.

Still, long-term investors should shy away from trading in and out of the market. Leave that to the professionals such as MRA and the rest of Wall Street.

Data shows that individual investors tend to get their timing wrong. They routinely buy when share prices are high, and sell when they are relatively low. It’s a loss making strategy.

Instead, non-professionals would be better off keeping their stock holdings and adding to them when the market pulls back. The idea is that over long periods the stock market tends to trend higher.