Stock market study: 104 consecutive days without a 1% decline


The S&P 500’s current rally is extremely steady. The S&P has gone 104 consecutive trading days without a daily decline of at least 1% (CLOSE $).
*I wrote this in the morning. It’ll be 105 consecutive days as of today’s close.
Here are the historical cases in which the S&P went at least 100 consecutive days without a 1% decline.

  1. January 10, 2018 (current case)
  2. March 7, 2017
  3. December 8, 1995
  4. May 3, 1995
  5. May 24, 1985
  6. October 25, 1967
  7. December 10, 1965
  8. April 20, 1964
  9. July 23, 1963
  10. March 20, 1961
  11. May 9, 1958
  12. July 5, 1957
  13. April 6, 1954

Here’s what happened next.

March 7, 2017

The S&P has not made a 6%+ “small correction” to this day. It has been more than 9 months.

December 8, 1995

The S&P began a 6% “small correction” 3 months later in February 1996.

May 3, 1995

The S&P 500 did not make a 6%+ “small correction” until 9 months later in February 1996.

May 24, 1985

The S&P began an 8.4% “small correction” less than 2 months later in July.

October 25, 1967

This signal came out as the S&P was in the beginning of a 11.7% “small correction”. This historical case clearly does not apply to today. Today, the S&P is rallying to new all-time highs.

December 10, 1965

The S&P began a 23.6% “significant correction” 2 months later in February 1966.

April 20, 1964

The S&P began a 10.9% “small correction” more than 1 year later in May 1965.

July 23, 1963

The S&P began a 7.5% “small correction” 3 months later in October.

March 20, 1961

The S&P began a 29.3% “significant correction” 9 months later in December.

May 9, 1958

The S&P’s next correction was a 14% “significant correction”, which began more than 1 year later in August 1959.

July 5, 1957

This signal came out in the middle of the S&P’s “significant correction”. This historical case doesn’t apply to today because the S&P is not in a significant correction right now.

April 6, 1954

The S&P began a 6.8% “small correction” 11 months later in March 1955.

Conclusion

As you can see, the results from this study are all over the place. Sometimes the S&P didn’t begin a 6%+ “small correction” for more than a year, and sometimes the S&P began a correction 2-3 months later.
As a result, this is not a bearish study for the U.S. stock market. This is an irrelevant study. Just because the stock market hasn’t fallen >1% in 104 days doesn’t mean that it’ll tank.
The inconsistency of these results proves¬†that not every “extreme” study is useful for the medium or long term. Be careful when you see a headline that states “the stock market has just set a record…”. Always focus on the conclusion.

6 comments add yours

  1. Can u check if any of these corrections had weekly rsi divergences vs price? This way we can see which corrections had/ had not have weekly rsi divergences in order to get a pattern to help gauge a more predictable outcome

  2. Thank you for your great input! One of the best blogs around. Even though I don’t believe in TA, I find your analysis very smart and well thought. Keep up the great work!

    • Hi Bob,
      TA on its own doesn’t work, especially in the U.S. stock market. But it becomes much more useful when you combine it with fundamentals.

  3. Stocks are at the second highest PE values of all time in the markets. Overall that’s not a good sign bc the other times we’ve been this high a 40% downdraw has the standard if not more.

    • Yes that’s true. But historically, valuations have not been the catalyst for bear markets or significant recessions. Valuations cannot be used to time market tops.

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