Thoughts

1. The S&P is up 5 months in a row. Extremely bullish in the medium-term.
2. Volatility has been notably absent in August. Not as bearish as you think.
3. Gartman remains bearish on U.S. stocks. You know what that means…
4. This economic expansion is aged. Not bearish for stocks.
5. Stock buybacks will continue to surge this year, putting a floor under the stock market.
6. Gold’s seasonality is bullish in September.

1 am: The S&P is up 5 months in a row. EXTREMELY bullish in the medium term.

It’s official. August is over, and the S&P is up 5 months in a row. When this happens, the U.S. stock market’s medium term outlook is very bullish (see study)

1 am: Volatility has been notably absent in August. Not as bearish as you think.

Volatility has been notably absent from the U.S. stock market this August. This has been the calmest August since 1967, with all daily moves less than 0.8% (CLOSE vs. CLOSE $)

Get my book!

Does this mean that volatility will increase and the stock market will fall in the near future?

No.

There have only been 3 historical cases in which all daily movements in August were less than 0.8%

1. August 1967
2. August 1965
3. August 1963

Here’s how the S&P 500 did over the next 1 year. Not necessarily bearish.

1 am: Gartman remains bearish on U.S. stocks. You know what that means…

Dennis Gartman remains very bearish on U.S. stocks. From his latest newsletter:

It is far too early to suggest being short of equities, for we’ve tried that before and it proved unwise, but it is time for us to reiterate our admonition that one must absolutely refrain from adding to long positions. Even more certainly one must refrain from buying new positions!

Meanwhile in March 2018, Gartman predicted that “the U.S. stock market is at a multi-year top”.

For those who don’t know, Dennis Gartman is a rather reliable contrarian indicator. This is good news for equity bulls.

1 am: This economic expansion is aged. Not bearish for stocks.

The U.S. economy & stock market move in the same direction in the medium-long term. At 9 years and counting, the current economic expansion is aged.

This is not bearish for stocks. Economic expansions don’t die of old age. As you can see in the following chart, economic expansions in the U.S. have become longer and longer over the past 150 years. Economic expansions are constantly setting new “records”.

The current economic expansion will probably end up being the longest in U.S. history.

1 am: Stock buybacks will continue to surge this year, putting a floor under the stock market.

Total stock buybacks are expected to exceed $1 trillion this year, thereby putting a floor under the stock market. The stock market has not made a “big correction” this year because companies are buying back their own stocks on every dip in the market.

I expect the remaining 4 months of 2018 to be less volatile than the past 8 months. There’s a massive gap between announced buybacks (companies’ intended buybacks) and what’s actually been executed. This suggests that corporate buybacks will surge on the next stock market pullback. That’s why the stock market’s pullbacks in 2018 have become shallower and shallower.

1 am: Gold’s seasonality is bullish in September.

September is gold’s strongest month in terms of seasonality (highest average historical performance by month).

We demonstrated a study on August 25 that’s short-medium term bullish for gold.

Outlook

Here’s what I think will happen based on my discretionary outlook.

1. 2018 will trend higher but will also be a choppy year.
2. The S&P 500 has approximately 1 year left in this bull market (bull market top sometime in 2019).