42 Days and Counting...

It has now been 42 days since the S&P 500 has had a pullback (one-day or multi-day) of 1%.  Since 1990, there have been 10 other periods where the index went 40 days or more without a 1% pullback.   The table below highlights these occurrences.

The S&P 500 is up 8.75% over the last 42 days.  As shown, the number of days without the 1% pullback ranges from 40 to 70, and the price gain ranges from 4% to 9%.  So while there have been longer periods of time without a 1% pullback, the current gain of 8.75% without a 1% decline is at the top end of the range over the last 20 years.  Interestingly, once the streaks ended, the decline of 1% or more never got worse than -2.53% before another gain of 1% or more occurred.

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Comments

[tradepimp1]

I did this same study the other week except I went all the way back to 1950. You're missing March and November 1998 as well as 2000. In addition the S&P has only had 139 instances going back to Jan 1950 where it made it 40 days without a 1% pullback.

The inference here is that we are within 6-8 months of a long term top as seen in the 2000 and the 2007 example or we are initiating another multiyear bull market as seen in the mid/late 90's example and the mid 2000's example.

I would argue that this fed induced rally will be short lived because there is no tech bubble (1990's) or housing bubble (mid 2000's) to sustain the market this time around. Unfortunately the last line of defense is a commodity bubble, but we all know that 150 dollar a barrel oil would destroy GDP growth.

Lastly, this 40+ day rally has been on the back of terrible volume so I think that it get's sold hard in next couple of weeks as volume comes in, and in about 2-3 weeks it will be a fantastic time to buy back into the market to ride the next light volume rally.