Investors are finally catching a break…

The first half of 2022 was brutal. Stocks and bonds crashed in unison. There was almost nowhere to hide from the carnage.

Things turned around last month, though. The S&P 500 Index rocketed 9% higher in July. That’s a massive one-month move. Similar gains have only happened 2% of the time since 1950.

Most important, this huge one-month gain means more upside is possible. And according to history, we could see a 13% rally over the next year.

Let me explain…

If you could only use one tool to make investment decisions, it should be the trend.

Not everyone will agree with that. It might even make some folks angry. They might wonder, “How could price patterns matter more than fundamentals, economic conditions, or what the Federal Reserve is up to?”

Well, to make it simple… prices take all of that into account. They’re not always right. But following the trend tends to position you for where stocks are heading next.

The trend had been down throughout 2022. But after July’s massive 9% jump, the picture could be changing. Take a look…

Stocks recovered more than half of their total losses for the year. And while we can’t know for sure if the bear market is over, it’s a good sign going forward.

That’s because a one-month gain of this size is rare. Similar gains have only happened 16 other times since 1950. And history shows more gains are likely. Take a look…

Buying after similar setups led to 9.3% returns in six months. Over a year, those gains swelled to 13.2%.

That crushes the typical buy-and-hold return for the market. And the odds of gains are high as well… Stocks were up 81% of the time a year after these cases.

This is the power of the trend. Once prices get moving in one direction, they tend to keep moving.

Still, there’s no guarantee that this is a new bull market in the making. These kinds of setups can happen during a major bear market. And if that’s the case, we could still see more losses from here.

That’s why we’ll be watching the market closely in the coming weeks. If the recent rally continues, it’ll likely be the all-clear to get back into stocks in a big way.

Good investing,

Brett Eversole

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Source: Daily Wealth