R2| Monday, December 7, 2020 THE WALL STREET JOURNAL.

Investors willhear or read about

Wall Street pros using contrary or

contrarian indicators to predict which

way asset prices will move. It may

be particularly relevant now.

Put simply, a contrary indicator

is one that tells you it may be a

good time to invest in the oppo-

site way from the herd. “Remem-

ber, the market is designed to

fool the majority of people

most: That’s the basis for

contrary indicators,” says Ste-

ven Strazza, a technical ana-

lyst at All Star Charts. “Most

contrary indicators work best

when at extremes,” he says.

That means if a contrary indicator

shows that investors are overwhelm-

ingly bearish (believe stock prices will

fall), then it could be time to be bullish

(expect the market to rally).

One such indicator is the bull-bear

spread of the AAII Sentiment Survey

from the American Association of Indi-

vidual Investors. Currently it is below

zero and near the lows during the lows

of the financial crisis, Mr. Strazza says.

The extreme bearish reading with the

market at highs “should only be viewed

as more bullish,” he says.

Another contrary indicator is how

much money is flowing into stocks. This

year, there has been a net outflow of

cash from the stock market. Again, the

idea is that when people are over-

whelmingly scared about investing in

stocks, it may be time to buy

them. At least that’s the theory.

—Simon Constable

Explaining

Contrary

Indicators

A Journal Report

special look at the

numbersandnewsabout

this month’s investing

2020

5.1% 5.5

–3.1

JA N

SO

U.S.-stock funds

–0.7

13.4

Source: FactSet

Records All Around

The Dow 's climb to the 30000 milestone on Nov. 24 benefited ETFs that

track it. But the Dow had company, as other major stock indexes also set

records during the month.

ProShares Ultra Dow30 SPDR DJIA ETF Trust iShares Dow Jones U.S. ETF

2018 '20

$300.43

2018 '20 2018 '20

$28.75

$54.59

$200.42

$115.37

$182.32

-20

0

20

40

60

80

100

120 %

2018 '19 '20

Nov. 24, 2020

DJIA crosses 30000

Jan. 25, 2017

DJIA crosses 20000

Nasdaq

Composite

Close on 1/25/17

5656.34

Close on 11/24/20

12036.79

S&P 500

2298.37

3635.41

Russell

2000

1382.44

1853.53

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PHOTO: BRENDAN MCDERMID/REUTERS; MONITOR: GIACOMO BAGNARA; IN TRANSLATION: PAUL BLOW

‘People see the strong performance and think, “I want

that too.” The market environment is conducive to

leverage, but investors should be very careful.’

Todd Rosenbluth,head of ETF and mutual-fund research at CFRA,

on the popularity ofleveraged and inverse ETFs

Good Medicine:

Stock Funds

Rose 13.4%

The stock marketapparently

was vaccinated in November.

A furious stock rally, fueled by

positive news on Covid-19 vac-

cines, pushed the average diver-

sified U.S.-stock fund to a 13.4%

total return in November, accord-

ing to Refinitiv Lipper data. The

month’s gains pushed the aver-

age stock fund into the black for

the year to date, at 12.9%.

International-stock funds, sim-

ilarly, rallied 13.3%. They still trail

U.S. funds, though, with a year-

to-date gain of 6.7%.

While the vaccine gets credit,

along with an election result

that could mean gridlock in

Washington (something that

many investors don’t mind), it is

still the Federal Reserve that

rules markets.

Bob Shea, chief executive of-

ficer of TrimTabs Asset Man-

agement in New York, says the

most important thing is still

that the Fed under Jerome

Powell in September signaled

that it expects to hold interest

ratesnearzeroforatleast

three more years.

That signal followed Mr. Pow-

ell’s announcement the month

before that the central bank will

no longer pre-emptively raise

rates to fight inflation.

“That was a game-changer,”

Mr. Shea says of Mr. Powell’s

announcement, allowing the

market to broaden out. “That

was extraordinarily bullish. He

basically declared war on the

40 of the 60-40 portfolio”—re-

ferring to the traditional advice

of investing 60% in stocks and

40% bonds.

For two weeks in the middle

of November, investors even

poured money into stock funds

again—a net $25.6 billion, based

on Investment Company Insti-

tute estimates. They also put

$35.7 billion in bond funds, but

the positive flows to stocks

were striking since money had

generally been flowing out of

stock funds.

“On a lot of fronts, this is the

early innings of a big move from

bonds into stocks,” says Mr.

Shea. Stocks are expensive, he

says, but with rates so low, an

old Wall Street question that he

says he dislikes is nonetheless at

play: “What is the alternative?”

Even value-stock funds had a

good month. The funds, which

seek beaten-down stocks that

should theoretically recover, had

been struggling—drubbed by

their nemesis, growth-stock

funds. But in November, re-

sponding to the vaccines, Lip-

per’s small-cap value-fund cate-

gory soared 18.2% and other

value categories had similar

gains, though all categories are

flat or slightly down for the year.

Bond funds rose in November.

Funds tied to intermediate-ma-

turity, investment-grade debt

(the most common type of fixed-

income fund) rose 1.4%, and are

up 7.8% for the year to date.

Mr. Poweris a Wall Street

Journal news editor in South

Brunswick, N.J. Email him at

[email protected].

In a tough year for everyone, it’s nice to celebrate. Aside from the strength

of the market in general, on Nov. 24 investors were able to applaud—from a

distance—the Dow Jones Industrial Average’s rise to the 30000 milestone. The

latest 10,000-point climb was accomplished in just 46 months, much faster

than the climb to 20000 (then again, each milestone is easier, by the math).

Above, traderPeter Tuchmanalong with specialist traderMichael Pistillooutside the NYSE on the big day.

Dow

30K

Bitcoin’s

intraday

record, which

it hit on

Dec. 1.

The digital

currency has

nearly tripled

in 2020.

Gold-oriented

funds’ decline

in November,

as stocks

roared. Still,

gold funds are

showing an

average 22.4%

return for the

year so far.

The Dow’s

record close

on Friday; it is

up 954.78

points or 3.3%

over the past

two weeks

alone.

Sources:

Dow Jones

Market Data,

Refinitiv

Lipper,

CoinDesk

$19,920.53

The Nasdaq

composite’s

year-to-date

gain through

Friday,

powered by

tech stocks

-5.3%

39%

lCharted

62.5% 2,520

The Dow’s percentage climb

from its March nadir during

the early pandemic lockdowns

Dow points that Apple
alone contributed to the
11.24.20 climb to 30K from 20K

30218.26

DATA

lIn Translation



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