A year ago I was pointing out the eerie similarities in April (2011) to conditions the previous April (2010), and sure enough the similarities continued into an almost identical 20% summer correction.
And here we are looking at a similar picture as March draws to a close this year.
Like the last two years, the S&P 500 has had an impressive rally to a potentially overbought condition above its long-term 200-day m.a., and technical indicators are in their overbought zones.
Investor sentiment reached high levels of bullishness and complacency in April of 2010 and 2011, low levels of fear, as can be seen in this chart of the VIX Index (also known as The Fear Index).
And here we are with investor sentiment at similar levels of no fear (high levels of bullishness and complacency, as indicated by the level of the VIX (and numerous other measurements of sentiment).
In April in each of the last two years, the U.S. economic recovery had been showing surprising strength during the fall and winter months, and then began showing signs of stumbling.
And this year, we’ve certainly seen surprising economic strength this winter, with continuous positive surprises in the monthly economic reports, which easily beat the consensus forecasts of economists and analysts.
And now we’re seeing a string of negative surprises almost identical to the situations in April 2010, and April, 2011, indicating the recovery is stalling again.
Then there is Europe. In each of the last two years the eurozone debt crisis had receded into the background by April, only to come back into the headlines in the spring.
And here we are with the worries about a default by Greece kicked down the road, but now concerns about Spain and a recession in Europe coming into the picture.
I could go on with the list but have run out of time to get this post on.
To be continued.
To read my weekend newspaper column ‘Here We Go Again Already?’ Click here.
Images: Flickr (licence attribution)
About The Author
Sy Harding publishes the financial website www.StreetSmartReport.com and a free daily Internet blog at www.SyHardingblog.com. In 1999 he authored Riding The Bear – How To Prosper In the Coming Bear Market. His latest book is Beat the Market the Easy Way! – Proven Seasonal Strategies Double Market’s Performance!