'The Bear Market Is Over': Sundial Research Founder

The S&P 500 has experienced 110 reversals in the previous 135 sessions, representing 1% shifts from high or low to close. Recent sessions have seen an extraordinary increase in the volume of buyers who are eager to acquire visibility.

“The bear market is over,” Sundial Capital Research founder Jason Goepfert said Tuesday, calling out an extremely macro data point.

“In modern markets, the S&P 500 has never lost ground over the following year when advancing volume was 87% or more of total volume for 2 out of 3 days coming off a 52-week low. It has a perfect track record,” Goepfert said in a tweet.

The bear market is over.*

In modern markets, the S&P 500 has never lost ground over the following year when advancing volume was 87% or more of total volume for 2 out of 3 days coming off a 52-week low.

It has a perfect track record. ** pic.twitter.com/1p6moIqrX5

— Jason Goepfert (@jasongoepfert) July 19, 2022

“Of course, this doesn't preclude short-term losses,” he said. “Of course, I can't predict the future. Of course, this time is different. Of course, it would be great to have a larger sample size. ** Beware anything that seems ‘perfect,’” the SentimenTrader founder said.

It's a big call indeed: equities are likely to see further losses as sky-high inflation and an increasingly hawkish Federal Reserve continue to pose risks to the economic outlook, according to Morgan Stanley MS strategist Michael Wilson.

"Counter-trend rally may continue, but make no mistake, we don’t believe this bear market is over, even if we avoid a recession," said Wilson, who estimates a 36% chance of a recession in the next 12 months.

The federal funds target range was increased by 75 basis points to 1.5%-1.75% by Fed policymakers in June. This was the first 75-basis-point rate increase since 1994.

The Fed Backdrop: Federal Reserve Chairman Jerome Powell told reporters following the June meeting that another raise of that size is anticipated for late July, with indications of persistently strong inflation pushing investors to reevaluate the outlook for the economy.

Normally, the central bank won't stop tightening until its policy rate is higher than inflation. According to the consumer price index and the Federal Reserve's preferred measure of personal consumption expenditures, the inflation rate stands at 8.6% and 5.2%, respectively.

Before the Fed would alter its direction at this rate, the labor market would have to suffer. As seen in the June jobs data, companies created 372,000 more jobs than expected, and the unemployment rate remained stable at 3.6%, close to a 50-year low.

According to Morgan Stanley, it is too early to predict an impending recession; instead, the firm predicts "stagflation," in which inflation stays higher for longer as growth slows down but is still nominally positive, and financial markets remain volatile.