On Wall Street, technical analysts make money by identifying patterns in charts in their efforts to forecast what’ll happen next in the markets. This contrasts with fundamental analysts, who base their forecasts on stuff like earnings and industry trends.
As such, there aren’t too many folks who think it’s wise to bet one’s life savings on someone’s technical analysis. Nevertheless, it’s at least interesting to see what these analysts find.
That brings us to a new observation made by RBC Capital Markets technical analyst Robert Sluymer, who sees something in the stock market today that looks just like what happened before the beginnings of the last two long-term, secular bull markets.
“We appreciate the extensive differences/counter arguments between today’s macro backdrop and the mid 50’s & 80’s, but given price patterns effectively reflect investor reactions the similarities are noteworthy and important food for thought,” Sluymer said.
“Similar to 1953-1954 and 1984-85, 2015-16 defined the first pause/pullback following breakouts from decade long trading ranges,” he observed. “Secondly, similar to 1954 and 1985, 2016 broke-out from 12-15 month trading ranges following 15% pullbacks.”
Indeed, this market has been about a series of fits and starts eventually culminating into new all-time highs.
But is this really just the beginning of a long-term, secular bull market? That thesis is a tough sell with the current bull market entering its seventh year during a time of heightened uncertainty.
For now, Sluymer and his team are believers in the bull.
“Beyond the noteworthy parallels, we continue to view the secular, cycle and intermediate-term backdrop for equities today as positive with further upside likely through year-end and into 2017,” he said.
Sam Ro is managing editor at Yahoo Finance.