Bull Market Giving It a Run for the Money

Last year, stocks prices peaked on September 18 and then fell nearly 5% over the next three weeks.

On October 10, a “kickstarter” signal showed a wave of bullish buying activity. And by year-end, stocks were 9% above mid-October lows.

This year… the magnitude of the market’s moves is larger than last year’s, but the seasonality is roughly the same. Stocks peaked on September 19 this year and fell nearly 10% over four weeks into October 15.

And while the market’s long-term prospects are clearly in question, I observed two “kickstarter” signals recently — on October 21 and 28 — that suggest the bulls are making a strong push and may succeed in spurring gains into year-end.

Here’s a snippet of the note I sent to Cycle 9 Alert subscribers on October 21, alerting them to the “kickstarter” signal that hit my radar and its implications:

The idea is simple: When the number of bullish (advancing) stocks greatly outweighs the number of bearish (declining) stocks on a given day, it’s a reliable signal that bullish sentiment is dominant and a two- to three-month rally is likely to begin.

…today’s market action is triggering a kickstarter signal — four stocks are advancing for every one stock that’s declining.

But today’s kickstarter signal looks a bit different than the two others I’ve seen this year.

Today’s signal is coming a few days after a climax of heavy selling. In contrast, the kickstarter signals in March and July appeared at the end of stock price rallies.

And the signal is more potent when it appears after a sell-off.

Last year’s mid-October wave of “kickstarter” bullish buying came on the heels of a sell-off and spurred a 9% rally into year-end.

I don’t expect to see the market move 9% higher by the end of 2014 but seeing a kickstarter signal after the wave of selling is a positive sign that suggests the bulls haven’t given up control just yet.

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