Thoughts

1. VIX has made a short-term bottom. A short-term bearish factor for the U.S. stock market.
2. “In 2 weeks time, this will be the longest bull market in history”. This is not true
3. Heavy Truck Sales are trending higher. Medium-long term bullish for stocks
4. JOLTS went up a little but are still trending higher. Bullish for stocks.

1 am: VIX has made a short-term bottom. A short-term bearish factor for the U.S. stock market.

VIX has been getting crushed lately and is now below its 2 standard deviation Bollinger Band.

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When this happens:

1. VIX usually makes a short-term bottom. So if you want to go long VIX, now is probably the time to do it.
2. The stock market faces a bit of short-term weakness (i.e. over the next 1-2 weeks). This “weakness” can take the form of a sideways consolidation or a pullback.

1 am: “In 2 weeks time, this will be the longest bull market in history”. This is not true

One of the silliest false narratives is “in 2 weeks time, the current bull market will be the longest one in history”.

For starters, bull markets don’t die of old age. Over the past 100 years bull markets have lasted longer and longer simply because economic expansions have lasted longer and longer.

More importantly, this “record bull market” is only a record based on a technicality. The conventional definition of a “bear market” is a 20% decline from the top to bottom using daily CLOSE prices. This makes no sense. There is nothing inherently different between a 19% decline (which supposedly isn’t a “bear market”) and a 21% decline (which supposedly is a “bear market”).

The S&P 500 did fall more than 20% in 2011: it fell 21% using daily HIGH and LOW prices but fell 19% using CLOSE prices. In essence, this “bull market” based on conventional definitions hasn’t lasted 9 years. It’s lasted 7 years.

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We don’t use “20%” as the definition for “bear markets” in the Medium-Long Term Model. For us, these 20% declines are merely big corrections. “Bear markets” are the massive declines from 2007-2009, 2000-2002, 1973-1974, and 1968-1970 (as defined by the Medium-Long Term Model).

1 am: Heavy Truck Sales are trending higher. Medium-long term bullish for stocks

The latest reading for Heavy Truck Sales went up from 461k to 485k. But more importantly, Heavy Truck Sales are still trending higher.

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This is a medium-long term bullish sign for the stock market. Historically, Heavy Truck Sales trended downwards before bear markets and economic recessions began.

1 am: JOLTS went up a little but are still trending higher. Bullish for stocks.

The latest reading for Job Openings went up a little from its previous reading. But more importantly, Job Openings are still trending higher.

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This confirms the medium-long term bullish sign in Initial and Continued Claims. JOLTS is a leading indicator for the stock market and economy. This chart demonstrates the positive correlation between JOLTS and the S&P 500. An uptrend in JOLTS = an uptrend in the S&P 500.

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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.