New-all time highs in August for the U.S. stock market are rare because the stock market’s seasonality in August isn’t particularly bullish. But you know what’s even rarer? 4 consecutive all-time highs in August.
As of yesterday, the S&P made 4 consecutive all-time highs (CLOSE $) in August.
The last time this happened was in August 1987, just before the S&P made a “big correction”.
But of course “the last time X happened, the stock market did Y” doesn’t mean anything. You need to look at all the historical cases to derive a conclusion.
There are only 3 historical cases in which the S&P made 4 consecutive all-time highs in August:
- August 11, 1987
- August 11, 1972
- August 7, 1951
Here’s what the S&P did next.
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1972 is the only historical case in which the S&P made 5 consecutive all-time highs in August. Let’s look at these historical cases in detail.
August 11, 1987
The stock market immediately fell into a “big correction”
August 11, 1972
The stock market rallied another 4 months before it began a bear market.
August 7, 1951
The stock market rallied more than 1 year before starting a “big correction”
As you can see, this is not a particularly bullish study for the U.S. stock market. It suggests that the U.S. stock market will begin a “big correction” or bear market sometime within the next 1.5 years.
Based on where the Medium-Long Term Model is right now:
- A big correction or bear market will not start in 2018. The stock market’s medium-long term is bullish (i.e. still a “big rally”, still a “bull market”)
- 2019 will be a very different story. Bull market top somewhere in 2019.
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