Sunday, April 17, 2016

Week In Review (4/11/16 - 4/15/16)

After falling more than 1% the week prior, stocks resumed their recent strength this week as the S&P 500 gained 1.6%, the NASDAQ jumped 1.8% and the Russell 2000 really outperformed by advancing 3%.

The relative outperformance in the NASDAQ and Russell were welcomed arrivals as they've been the year-to-date laggards in 2016.  Small caps are now almost at breakeven for the year while the tech-heavy NASDAQ has a bit more work left to do as it's still down 1.4% in 2016.

It's well known that April has historically been one of the market's better months and, so far, this April has been no different.  We looked back over the last 20 years and studied how the market has behaved on average during April.  What we see is that the market, besides being overwhelmingly positive, tends to hit its low point around mid-month and then trends higher into month-end.  We'll see if that holds true this time around.

Bespoke published the charts below at the end of March and it speaks to the indecisive mood of the market.  At that time, S&P had gone 315 days without making a new bull market high.  We're now at 326 days and which makes it the longest streak since this bull started in March 2009.  However, we're nowhere near the longest streak (within a bull market) in market history and an optimist could interpret this as the index taking a rest/pause before resuming higher.

One of the primary causes behind this rangebound market has been the completely lackluster sentiment that's persisted for several months now.  We're now at 24 straight weeks where the AAII Investor Sentiment poll has shown a bullish reading of less than 40%.  The S&P is just a few percentage points from all time highs but bullish sentiment clocked in last week at just 27.8%.

Per the Bespoke chart below, this latest bounce in the S&P has not been accompanied by the type of jump in bullish sentiment that we'd usually expect to see.

Have a great week.

Ryan Worch is the Managing Director of Worch Capital LLC. Worch Capital LLC is the general partner of a long/short equity strategy that operates with a directional bias and while emphasizing capital preservation at all times.

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