Study: the stock market made a new all time high. What happens next

It’s been a tough 2018, but so far we’ve been on the right side of the market this year. Our message throughout this year has been:

  1. The bull market is not over. At least 1-2 more years.
  2. The January-February 2018 “small correction” will not turn into a “big correction”.

Both of these predictions have turned out to be correct. The S&P 500 just made a new intraday all-time high.

Here’s what happens next to the S&P 500 when it makes a new all-time high in at least 142 trading days (i.e. right now).

Click here to download the data in Excel.
As you can see, when the stock market makes a new high for the first time in a long time, it usually keeps going up over the next year. This is logical.
When the stock market doesn’t make a new high in a long time, it’s akin to a rocket that’s gathering fuel for a long time. The longer the rocket gathers fuel, the more energy it’ll have when it does blast off. When the stock market finally makes a new all-time high (the rocket ignites), the stock market blasts off. The more fuel the rocket has, the higher it can go.
There is only 1 bearish case in this study: July 13, 2007.
That bearish case does not apply to today. The S&P made a new all-time high for the first time in 7 years because of the 2000-2002 bear market. The S&P 500’s current all-time high comes after a “small correction” that has lasted 142 trading days.

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2 comments add yours

  1. Troy, what is your dividing line between short term pullback & a significant correction in % terms. Do you go as high as -14% & call it a short term pullback??

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