Noteworthy Differences Between 2018 And 2020


In a recent well-researched article, Michael Santoli highlights numerous relevant and concerning data points:

Get used to the phrase ‘since January 2018,’ because plenty of behavioral indictors have reached levels last seen then.

The four-week total of global inflows into equity funds? Highest since January 2018.

Likewise, the ratio of upward to downward profit-estimate revisions for S&P 500 companies.

Fund managers in Bank of America’s latest monthly client survey had their highest portfolio allocation to equities since January 2018.

And the week before last, the American Association of Individual Investors survey showed 55% were bullish, the most since….well, just guess.”

Skeptical sentiment was a tailwind for markets in the earlier stages of the advance off the March low. It is probably fair to say sentiment has moved into the neutral-to-headwind category in recent weeks.


Markets move on the weight of the evidence, which includes the “keep an open mind about pullbacks, failed breakouts, and volatility” data points above. The weight of the evidence also includes price action, which provides additional insight into the market’s longer-term outlook.

Q1 2018 TO Q4 2020

The S&P 500 peaked on January 26, 2018, which kicked off a period of wild swings and consolidation that lasted into 2020. The three biggest bearish episodes began in Q1 2018, Q4 2018, and Q1 2020.


The chart below shows the performance of the Nasdaq 100 relative to long-term Treasury bonds. The three bearish periods are shown via the blue boxes. After the January 2018 “harder market” kickoff, the QQQ:TLT ratio pushed higher and reversed sharply in Q4 2018. The ratio failed in the same general area in Q1 2020. We know bad things happened in risk assets during these three periods. Therefore, it is notable the conviction to own growth-oriented QQQ relative to the conviction to own defensive-oriented TLT was strong enough in recent weeks for the ratio to break out above the areas that acted as resistance in 2018 and 2020.

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Disclosure: This post contains the current opinions of the author but not necessarily those of Ciovacco Capital Management. The opinions are subject to change without notice. This article is ...

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