Study: how long does it take for a 10%+ "small correction" to make new highs


The S&P 500 made a 10%+ “small correction” from January- February 2018.
In today’s study I’m going to look at how long it usually takes for the S&P 500 to go from an old all-time high to making a new all time high.

*For starters, the U.S. stock market is already very close to making a new all-time high. The Wilkshire 5000 Index is a market cap weighted index of ALL the actively traded U.S. stocks. This index is much closer to making a new all-time high.

Here are the historical 10%+ “small corrections”, as defined by the Medium-Long Term Model.

  1. April 2, 2012
  2. July 16, 2007
  3. January 3, 2000
  4. July 19, 1999
  5. October 8, 1997
  6. April 14, 1997
  7. May 23, 1996
  8. January 3, 1990
  9. August 27, 1986
  10. September 25, 1967
  11. June 29, 1965
  12. September 23, 1955

Here’s how long it took for the S&P to go from a pre-correction high to a new post-correction high.

April 2, 2012

It took 98 days for the S&P 5 make a new all time high.

July 16, 2007

It took 58 days for the S&P to make new highs.

January 3, 2000

It took 54 days for the S&P to make new highs.

July 19, 1999

It took 85 days for the S&P to make new highs.

October 8, 1997

It took 40 days for the S&P to make new highs.

February 19, 1997

It took 52 days for the S&P to make new highs.

May 23, 1996

It took 78 days for the S&P to make new highs.

January 3, 1990

It took 102 days for the S&P to make new highs.

August 27, 1986

It took 68 days for the S&P to make new highs.

September 25, 1967

It took 147 days for the S&P to make new highs.

May 13, 1965

It took 92 days for the S&P to make new highs.

September 23, 1955

It took 35 days for the S&P to make new highs.

Conclusion

Here’s how long it took historical 10%+ “small” corrections to make a new high.

  1. 0 – 21 days (1 month):
  2. 22 – 42 days (2 months): 11
  3. 43 – 63 days (3 months): 1111
  4. 64 – 84 days (4 months): 11
  5. 85 -105 days (5 months): 111
  6. 106 – 126 days (6 months): 
  7. More than 6 months: 1

As you can see, it usually took 2 – 5 months for the S&P 500 to make a new all time high. There was one exception that took 7 months.
This study suggests that the S&P 500 should probably make a new high by the end of August 2018 (7 months from January 2018).
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6 comments add yours

  1. This study is really significant Troy, thanks.
    In case the S&P will not reach new ATH within August, could this be a dangerous signal telling that the bullish market is deteriorating?

    • I would give it another month Carlo. I.e. September. If $SPX still hasn’t made a new high by the end of September, this is a problem we should watch out for.

  2. Yes very interesting what happens AFTER Ath… mostly market may drop 40% but should we wait for deteriorating indicators first…

  3. Looks like Robert Pretcher EWI thinks the recent SNP high at 2874 is a throw over and the ending 5th wave but I feel otherwise as there are many ways to label the Elliot Waves Pattern. I am one of the few who agrees with Troy we will probably see a new high for the SNP into 2nd half 2018 as fundamentally there is no recession in sight as at yet besides the Fed is only gradually increasing the interest rate as there is no runaway in inflation. Techinically,I can say there is already an ABCDE already being formed with the E ending at 2594 and now it is telling me, dip buying for the SNP is better for choice. In about 2 to 3 weeks time from now, probably I shall have the confirmation of the medium term to long term trend. Once I have the confirmation, I shall keep you posted. We just need to be a little bit patient for the SNP to consolidate and base out. Like Troy said many times, he is more interested in the medium to long term trend. So do I.

  4. This study looks at exact high. So must be marginally higher (e.g. by 2-5 points). Cannot be marginally lower.

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