2024 Stock Market Outlook Remains Good!

There are lots of different ways of looking at stock market data.

We always talk about "technical analysis" and define it as using historical data (price, volume, etc.) to identify a pattern. Those patterns can help us identify situations with higher probability and guide us on how to place our bets.

Many forms of technical analysis will use different data. We discussed the importance of the moving averages back in March. You can read that note here.

Although there are dozens of approaches to using this data, we find only a few useful at HX Research.

One of our favorites is not considered technical analysis by many practitioners. This is where you look back at stock market history and find periods where something similar to what has just happened has occurred.

We look for situations where something has happened very rarely. We then look to see if those "rare" situations are valuable in predicting what happens next.

Nothing can predict the future perfectly, but if you have a situation where something has only happened a dozen times across forty years and has worked 90% of the time, you likely have a high probability bet!

Think of it in blackjack terms as having a face card against a dealer “4”.

At the start of April, we shared a group of statistics that pointed firmly to a higher stock market by year-end. You can read that note here.

We will update this view with similar data points in today's HX Daily issue.

We have taken these from some of our favorite commentators off of X/Twitter.

Many have mixed feelings about Twitter (and all social media), but we are huge fans. We find tons of great ideas and free access to super-smart folks.

The first data point comes from Ryan Detrick of Carson Group. He is one of our favorites!

Here is a tweet of his from last week…

It shows that if the stock market is up +10% or more as of the 100^th day of the year, there is an 85% that it is higher the rest of the year. It also goes up on average of +8.8% through year-end.

This compares to all years where the probability is 70% of being higher and +5.4% average return.

Look, the stock market is always a good bet to go higher with a seven-month view, but when you get a strong start, as we have seen year-to-date, it is even more likely to follow through.

Does this make sense? Isn't past performance supposed to NOT be an indicator of future performance?

Not with this kind of data. A strong double-digit up move in just 100 days out of the gates in a year indicates strong underlying trends powering the stock market higher. These are so strong that the market is highly likely to end higher and up more than usual.

Go through the details on that chart, and it looks even better.

Two of the three down years (1975 and 1983) were barely down. The only one that was painful was 1987, and that was with a once-in-a-lifetime stock market crash.

We think this data set holds up once again, and we end higher.

There is also another data set that is very interesting at the moment.

You may hear commentators talk about stock market volatility measured by the "VIX."

We could write a couple hundred words explaining the VIX, but we will let Investopedia go through the details…

The most basic definition is that it measures "fear" in the stock market. A high VIX indicates an expectation of a big move in the stock market. 

Like our discussion of seasonality the other day, there are many subtleties to how it is applied, but those are the basics.

Recently, the VIX has been collapsing. Here is the chart…

The VIX is below 12 and below levels it has not seen since 2017.

Some commentators consider a low VIX a sign of investor "complacency." This means the stock market could be subject to potential (nasty) surprises.

The data doesn't back up that view, but the recent drop below the "12" level gives us an interesting data set from another one of our friends at Bespoke Intelligence. They do great work, and you can check them out here. I encourage you to subscribe!

It has been more than a year since the VIX traded below "12," and going back to the inception of the VIX back in 1987, this has happened only four times.

Here is the table of those occurrences…

The data is quite positive. Looking out one year, the stock market was up very nicely each time.

This was also true 75% of the time, looking out six months (near year-end 2024) with one exception. That exception? COVID!

This data set points to a continuation of this BULL MARKET in 2024.

We will continue to monitor the data, and the world can change, but we remain constructive on the overall stock market through year-end.

Do you think the stock market (S&P 500) ends up 2024 higher than where it is right now? Let us know your thoughts in the comments section online or at [email protected].