Top bear spins chart indicator after 2023 stock surge

In 2022 bearish strategists had a powerful weapon; a simple tool that proved stocks were toxic- the S&P 500 downtrend.

On every rally, it sent stocks south. But not this year. The S&P 500 rallied through that line, and it hasn’t looked back. Now one bearish firm is trying to spin its busted trend tool.

For months Morgan Stanley’s fundamental strategists said the obvious downtrend proved their bearish case. When the trendline was capping rallies, they drew pictures like this:

**Jan 13, 2023, courtesy of bloomberg.com

But stocks ran and the downtrend stopped working. So what did Morgan Stanley do? Check out Exhibit 8 below. One month later, it drew a crafty new RISING line that conveniently fit random market peaks, and said “it failed again”.

**Feb 13, 2023 MS chart, courtesy of seekingalpha.com

Now here’s the problem- strategists shouldn’t cherry-pick evidence that supports their recommendations. Doesn’t matter if they’re manipulating subjective technical analysis tools or economic data sets. It’s just not right.

Your relative performance vs. the broader market will suffer if you let sell-side strategists misinform you.

I’ve spent years listening to these people, and they do have value, but not if you just accept what they say. You can’t really understand strategists’ recommendations unless you know what they’ve argued before.

My advice: Before you let strategist comments affect your investing process, make sure you know their track record.

Good luck, Jim