Never Fight a Bull Market

Investing isn't hard. But it can be unintuitive...

When prices are rising, you might worry that you've already missed the rally.

Rising prices do mean you'll pay more today than you would have yesterday. So buying after a run-up feels like a bad thing. But it isn't.

When you study the data, the power of buying momentum shines through. This is a key principle to understand... When prices are rising, they tend to keep rising.

It's surprising – but powerful. And it's why you never want to fight a bull market.

Right now, stocks are in a strong uptrend. We saw a rare stretch of gains over the past two months. And history shows it points to a 21% return over the next year.

Let me explain...

A Major Two-Month Rally Points to 21% Upside

The S&P 500 Index was up double digits in April. So last month, I looked at what happens after a fantastic month for stocks.

It turned out that buying after a strong month is a winning strategy. We found that a rising market tends to lead to more gains, based on the data.

Sure enough, that's exactly what we've seen of late. After booking a 10% gain in April, stocks rallied another 5% in May. Take a look...

Stocks posted a stunning 16% gain for April and May. This two-month rally shows the power of today's bull market. And historically, it means more gains are likely from here.

You see, a two-month rally this large is darn rare. We've seen only five other two-month rallies of 15%-plus since 1950. That means they happen about once every decade and a half. Here's what came after those rare setups...

Sticking with momentum might be unintuitive... but it works.

Stocks have typically returned 8.3% a year since 1950. But if you buy after a two-month rally of 15% or more, you can crush that return...

Similar setups led to gains of 9.7% in three months, 15.4% in six months, and 21% over a year. That's more than double the typical one-year return.

Stocks were also higher a year later in four of the five instances. The only losing trade came in 1987, the year of the worst one-day crash ever. And before the Black Monday crash, stocks were up 16% in the six months after the extreme. So the idea was working... before it ran into a buzzsaw.

What's more, this idea continues to work if we expand our requirements to include more triggers. If we look at two-month rallies of 12%-plus, we get 19 total extremes. Stocks were up a year later 89% of the time, with a typical one-year return of 18.7%.

That tells us we aren't cherry-picking the data. Instead, this simple setup points to strong momentum... which means stocks can keep rising.

This might seem unbelievable to a lot of investors. But it's true. We're in the middle of a strong bull market. Stop fighting it and stay long.

Good investing,

Brett Eversole

P.S. The S&P 500 just gained $11 trillion in value in seven weeks. And history shows the rally isn't over yet... because a stockpile of sidelined cash will soon begin flooding into stocks. It could send the Dow to 150,000 and catapult individual stocks 500% or more. Watch my free presentation now to get all the details.