Based on the Medium-Long Term Model’s current trajectory, the S&P 500 will probably begin a “significant correction” or bear market sometime in 2019 (most likely second half of 2019). This is a moving target and will change as we get more data.
The recent correction broke a lot of records: record number of consecutive days without a 1% movement, record # of “close highers” in a month, longest rally without a 3%+ pullback, etc. But there’s another historic streak that still stands.
The S&P has closed above its 200 daily moving average for 421 consecutive days. Here are all the historical cases in which the S&P closed above its 200 sma for at least 400 consecutive days.
- January 29, 2018 (present case)
- June 23, 2014
- February 27, 1998
- June 27, 1955
- March 7, 1952
Here’s what happened next to the S&P 500.
June 23, 2014
February 27, 1998
June 27, 1955
March 7, 1952
This study suggests that the current “small correction” in stocks will not turn into a “significant correction”. The next “significant correction” is at least months away. The beginning of a “significant correction” or bear market in 2019 is almost guaranteed. Our Medium-Long Term Model agrees with this study’s conclusion.
An extremely long consecutive streak above the 200 sma implies that the U.S. stock market’s momentum is very bullish. Markets don’t die on extremely strong momentum. Markets die after momentum has already weakened (i.e. bearish divergence).
Read Stock market on March 1, 2018: outlook