In the 12 months after they become extremely overbought for the first time in a year, stocks rally 85% of the time. And in the following 24 months, they rally 90% of the time. Average returns in the following one- and two-year periods are 16% and 19%, respectively.
In other words, after the market becomes this overbought for the first time in a year, stocks tend to pull back over the next month – then soar over the next 12 and 24 months.
That’s the pattern that was signaled yesterday.
And that means stocks will likely fall in January – before they absolutely soar throughout the rest of 2024.
You need to buy that dip.
Adapted: Luke Lango 20 Dec 2023
