Since June 16th, the market has reversed course higher, making the date at least a near-term bottom. From a technical perspective, the Russell 1000 broke through its 50-day moving average yesterday and broke above its upper downtrend line today. The 50-DMA is still moving lower, but this is the first time that the Russell 1000 has been above the 50-DMA since April 20th. However, the index is still 9.7% below its 200-DMA. These moves come as commodity prices have pulled back and earnings season begins.
As we highlighted in a Chart of the Day earlier this week, the lagging sectors during bear market declines tend to be the leaders in bear market rallies, which is holding true in the bounce since 6/16. The table below shows the 20 best performing stocks in the Russell 1000 Index since the 6/16 low. As you can see, these stocks are all still down considerably on a YTD basis, declining a median of 50.1%. However, these stocks have rebounded by a median of 42.1% since the low on 6/16. Only one of these stocks is below its 50-DMA, and only two are above their respective 200-DMA. If you think that the bear market has concluded, these would be some of the names worth looking deeper into.
On the other hand, the best performing sectors during bear market declines tend to be the worst performing sectors during bear market rallies. Of the 20 worst performing Russell 1000 stocks since 6/16, 14 belong to the energy sector (which has been the best sector on a YTD basis by a wide margin). On a median basis, these 20 stocks are still up 13.6% on a YTD basis, but they’ve shed 13.7% of their value since the market bottomed in mid June. Notably, these stocks (on a median basis) are closer to their 200-DMAs than they are to their 50-DMAs. If you think that we are currently in a bear market rally that is bound to reverse course, these names would be worth looking deeper into.