Are we seeing the beginnings of a new bull market in stocks? One market analyst that thinks so is Ralph Acampora, the Managing Director of Altaira Wealth Management and a pioneer in the development of technical analysis.
Ralph believes that we are in the early stages of a new bull market which is climbing a classic wall of worry. The evidence he sites begins with the fact that the S&P 500 and the Dow are within just a few percent of taking out their October 2007 highs.
As Mr Acampora points out, October 2007 was a time when “the public was in the market, everybody was bullish, and the world couldn’t be better.” Whereas today it’s just the opposite; “The public is in cash, they’re mostly in bonds… there’s tonnes of cash on the sidelines… I think the sentiment today if you’re a contrarian and everybody is negative, I think you have to be positive.”
Another factor that supports his thesis is that the companies leading this advance are quality blue chip names such as Chevron, Wal-Mart, Travelers and Walt Disney, all of which are at new all-time highs. And Exxon, which is also a Dow 30 stock, is within 4% of making a new all-time high.
A 6 year chart of Wal-Mart
Chart courtesy of stockcharts.com
Notes: Wal-Mart is at a new all-time high and prior to the company’s recent upside breakout it was consolidating for ten years – something which is very bullish from a technical point of view.
Mr Acampora also talks about the fact that the stock market only discounts negative news once, and yet we continually hear regurgitated news. Whether it’s a possible hard landing in China, the debt crisis in Europe, or the fiscal cliff in the United States, all of this has already been factored in by the market.
Germany’s Dax index, which Mr Acampora uses as his bellwether for Europe, is also just a few percent away from an all-time high.
“A classic, secular, long-term bull market starts with fear and blue chips.” That’s because if you have money, you’re a long-term investor, and you’re nervous about the economy, “you’re going to be as conservative as you can and you’re going to buy all the stocks that are moving right now. You’re going to buy blue chips.”
“At the end of a classic bull market is when you have speculative stocks and everybody gets greedy, and you go from fear to greed. We’re in the early, early stages of that.”
It is often said that you can’t have a bull market unless you have the participation of the financials, and as Mr Acampora points out, “the financials look terrific on the charts, they’re starting to come to life, and they’re about 18% of the S&P 500, so I’ve got all the pieces I want for a bull market.”
It’s important to stress that Mr Acampora is making the case for the long-term, which helps explain why his opinion differs from so many other technical analysts that focus only on the short-term.
Mr Acampora has a global reputation as a market historian and a technical analyst. He also teaches technical analysis at the New York Institute of finance, which is the school from which most Wall Street traders get their education.
It may well be that this is the beginning of a new bull market, and with the world’s most powerful central banks announcing that they will pump unlimited cheap money into the global financial system in order to try to stave off another global downturn, it is certainly unwise to bet against a rising tide. It’s for that reason that last month we covered our shorts and added blue chip names such as ConocoPhillips, Exxon, McDonald’s, IBM, Coca-Cola and Google to the 247Bull Portfolio.
Despite the fact that we are bullish on selected US blue chip stocks, it remains our opinion that portfolios should be overweight precious metals and their related equities. That’s because at the centre of our investment thesis is the belief that desperate governments will destroy the value of paper money sending wealth fleeing to the safety of gold and silver.