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Don't Expect a Vicious Bear Market in Stocks Anytime Soon

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Famed analytics expert Marc Chaikin says there's no reason to think that a bear market could be just around the corner.

"Other than 1987, every bear market since 1960 has been preceded by a recession," Chaikin, CEO of Chaikin Analytics, told TheStreet's Financial Success Strategies symposium.

Chaikin said that three factors -- none of which by and large are in place -- tend to precede a bear market, which is commonly defined as a 20% or more drop in multiple indexes.

The first factor is a decline in the 12-month moving average of housing starts, a trend that can signal a recession's beginning.

Chaikin Analytics CEO Marc Chaikin

He also said leading and coincident indicators such as those computed by the Conference Board typically turn lower before a bear market and a recession. Leading indicators like housing starts and the M2 (which is a measure of money supply) tend to turn downward before the economy starts to sink. Coincident indicators, meanwhile, move with the economy and include data like the Consumer Price Index.

A third indicator of a bear market is an inverted yield curve, in which short-term interest rates exceed long-term ones. Media reports have warned of a potential yield-curve inversion, but Chaikin contended that we're currently experiencing the exact opposite. The yield curve has flattened in 2017, which is the "most bullish thing in the market," he said. The expert said that a flat yield curve implies that the market will rise 10% in the next months.

Chaikin also cautioned investors to remember that "earnings move markets. Political uncertainty doesn't move markets. Valuations don't cause the market to peak, although they're important at times."

The simplest way to predict where the market is headed is to look for a pattern of higher highs and higher lows, he added.

"We've broken out above that [pattern]," Chaikin said. "That's not bearish, that's just overbought. This is a very strong market."

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