LIVE MARKETS-Forget the downgrade: "perfect weeks" flash bullish signal

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FORGET THE DOWNGRADE: "PERFECT WEEKS" FLASH BULLISH SIGNAL

For those who hadn't noticed, both the S&P 500 and the Nasdaq 100 scored "perfect weeks" on Friday, a combo that historically signals further gains ahead, according to SentimenTrader.

When, in the past, both indices rose every day of a 5-day calendar week, the S&P 500 .SPX delivered above-average returns in the months ahead and the Nasdaq 100 .NDX fared even better.

Jason Goepfert, Senior Research Analyst at SentimenTrader, points out that perfect weeks don't happen in bear markets - or at least they haven't before - which suggests current gains are not "just a bear market rally".

"During ongoing bear markets, investors tend to get too nervous to allow both indices to enjoy perfect weeks," he says.

And Friday's surprise U.S. credit downgrade is unlikely to change this positive pattern.

In fact, "when the big three agencies downgrade a sovereign, index, or sector (especially if they do so in a cluster), it has proved to be an excellent contrary indicator," Goepfert writes.

"The Moody's U.S. downgrade may throw a temporary wrench into stocks' recent remarkable run, but it shouldn't be too much of a factor in the short-term - it never has been before."

(Danilo Masoni)

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