Stock Talk - Stock Market V-Bottom: History Is Repeating and Most Investors May Still Be on the Sidelines

Starting point is 00:00:00 Okay, investors, here's the current reality. In the week since early April, we've watched the markets pull off a classic V-bottom driven by a perfect storm of Washington, D.C. induced tariff tantrums, hedge fund de-levering and blow-ups, and a rapid rebound that left many traders in the dust, embarrassed scrambling to explain what just happened in today's quick video. We'll cover why this rally, while surprising to some, was actually a textbook example how markets can behave in the aftermath of a panic selling and forced liquidations. We'll also explore why understanding the data behind these moves is critical, especially when fear dominates

Starting point is 00:00:37 the headlines. Investors, we've discussed for weeks in our videos looking back that April 7th was what we thought was the low for the overall S&P 500 index and U.S. stocks for most likely the rest of 2025 X an unforecastable Black Swan event. Much to the dismay of those calling for crashes, lower lows, retests of the lows, trading ranges lower, worse yet, those blown out on margin at the lows, were investors who panicked and went to cash late in the move down. Well, investors, sorry retired baby boomer hedge fund billionaire Ray Dalio at Paul Tudor Jones, I continue to think you are wrong at these turns, much as you've been for the last 10 years. Next to the great financial crisis in 2007-8, in the popping of the speculative dot-com bubble frenzy in 2000-2001, which did proceed longer and deeper recessions.

Starting point is 00:01:28 History says, enough damage has been done, and we have a V-bottom in near-exact fashion, similar to V-bottom's last 20 to 30 years. And, investors, the really good news here is this one looks to have happened without the Federal Reserve intervention and interest rate cutting. investors, the Zweig breath thrust on April 24th created the first of what many charters call a bullish island reversal pattern. Then, in the progress on the China tariff deal over the weekend of May 9th, almost exactly one month after the April low and two months to the day from when the S&P 500 first broke its 200-day moving average on Friday, March 7th, created a second island reversal higher, leaving those longing for lower prices to get back in, desperate to buy

Starting point is 00:02:13 or cover their shorts. We stalled and faded back from around 5965 for roughly a week back to the 200-day moving average. As of this writing Memorial Day Monday, it looks like to gap higher on Tuesday when the market is reopened. We did a video a few weeks ago titled V-bottoms. No one gets in. So far so good. Our team didn't think the 200-day moving average would be much resistance for the markets, unlike the horde of CNBC commentators I heard. On Monday the 12th, we blew right back through, the 200-day moving average, which many had predicted, would stop us. The S&P 500 is being supported by improving breadth. No, it's not just large-cap tech stocks working for the market.

Starting point is 00:02:54 The percentage of S&P 500 stocks rising above their 50-day, 200-day, the percentage of stocks in the S&P 500, making new 52-week highs without new 52-week lows, and the percent of stocks above their 20-day moving average has exploded as the upside momentum improves with the trend. Investors, history is on the side of the bulls. The strategists who have been calling for a retest have now been wrong for at least 800 S&P 500 points. We've given you the data on Zweig Bruthruss, investor sentiment data, invict spikes, and retracements in the last month. The proof of the truth is on the side of the bulls, not the bears, as price is truth. One can rationalize why the markets have v bottoms since early April on walking back of tariff extremism, better job data, and wage inflation data.

Starting point is 00:03:43 data, but viewers who know me know I like real-time market data. The bond market data since early April has been saying that real growth was okay, inflation peaked in early April, not the stagflationary doomed bias calls many have suggested. I'll leave you with an update on how the charts look first a similar period. That was mid.com, not peak.com. I feel compelled to keep doing this because Charles and I listened to dozens of technology conference calls over the past three or four weeks that were positive on the continued AI I build out growth for the next 12 to 18 months, and most of the stories I read in the financial

Starting point is 00:04:17 media are of the pending AI collapse, which isn't happening yet. Secondly, I haven't been able to find anyone who believes this analogy or will spend any time researching it. The market has behaved almost exactly as it has the last 15 years during event-induced sell-offs that reach bare market levels without the likelihood of our earnings or economic recession, like what happened in 2022. What's that? We spent exactly two months to the day breaking the 200-day moving average, then regaining it. Go ahead, count the days, and go back to our previous event-driven bottoms.

Starting point is 00:04:52 After regaining the 200-day moving average rapidly, the market stalled for 5 to 10 trading days and sold off post-option expiration into volatility expiration, pulling back 2 to 3%. Investors, 2 to 3% is untradable unless you're a day trader, unless you're great. Post-memoral weekend, we start. started higher once again. Many of you probably don't want to do the research on the V bottoms, so our team did it for you and presented it to you over the last four to five weeks. If we continue in this normal V bottom recovery path, what would that look like? Well, from here, it is quite frustrating to both bears who want to retest or worse, or permables who want a parabolic move higher. Investors,

Starting point is 00:05:33 historically the pattern would look like this. The S&P 500 would regain the level where it first broke the 10-week moving average, which is about the same as the 50-day moving average, almost exactly three months from when it first broke those levels. Okay, looking at the charts, let's call that S&P 500, 6,000 to 6,025 at the end of May, let's say, through June 6th. Investors, after that, it would take another month, call it to July 3rd to July 8th to fight through this level and base out near 6,100 plus, and then it would take another month, call it August, August 4th through 8th to reach a new all-time high in the cash S&P 500, call it 6175, 6200. We've penciled those levels in on the S&P 500 chart for those to see.

Starting point is 00:06:19 From here, let's call it what would be a lurch and grind higher about 1 to 1.5% per month, about 100 points per month into an August summer top, which is a very normal seasonal time for markets to peak. After that, we would expect a normal summer pullback in the markets, but investors, you most likely won't see those low levels of April again for quite some time. If at all this year, many institutions got too bearish near the April lows and de-risk and are already way behind the performance curve in the second quarter. This plays out as normal.

Starting point is 00:06:53 They will be even farther behind the indexes and benchmarks by August, so any summer sell-off into early October would likely be a buying opportunity for a year-end rally and new all-time highs in 2006. Hence, why our team has stuck with our 2025 year-end target of 6,600 even, as stocks sold off in April, and most strategists slash their targets from over that number to the low 5,000s, and now are raising them once again. Does that mean you shouldn't add to stocks, particularly if you are younger and in saving and accumulation mode? No.

Starting point is 00:07:27 How come? Because rarely can you pick the absolute level in both price and time on both the buy side, the sell side, and then the buy side, once again, particularly in gross stocks. Investors, regardless of the path for the economy and the financial markets over the next few months in the summer, the investment team at Oak Harvest will be here, crewing the ship, adjusting our models where we can. Until next week, have a blessed weekend and know that the Oak Harvest team is doing what we can to plan for you and your family's future, regardless of what stage you're at in your career or in your retirement. All content contained with an Oak Harvest podcast

Starting point is 00:08:02 expresses the views of the speaker and is for informational purposes only. It is based on information believed to be reliable when created, but any cited data, indicators, statistics, or other sources are not guaranteed. The views and opinions expressed herein may change without notice. Strategies and ideas discussed may not be right for you, and nothing in this podcast should be considered as personalized investment, tax or legal advice, or an offer or solicitation to buy or sell.

Starting point is 00:08:32 securities. Indexes such as the S&P 500 are not available for direct investment and your investment results may differ when compared to an index. Specific portfolio actions or strategies discussed will not apply to all client portfolios. Investing involves the risk of loss and past performance is not indicative of future results.

Stock Talk - Stock Market V-Bottom: History Is Repeating and Most Investors May Still Be on the Sidelines

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