Study: the stock market's rally is accelerating


The U.S. stock market’s rally is accelerating. It used to grind higher slowly and incessantly. It is now surging.
On January 26, the S&P 500 gained >1% for the first time since September 11, 2017 (CLOSE vs CLOSE $). The S&P has gained 14% from September 11, 2017 – present.
This is by far the longest streak in which the S&P did not gain more than 1% during a rally (94 trading days).
Let’s look at what happens when the stock market’s rally accelerates. Here are the study’s parameters:

  1. The S&P closed higher than yesterday’s CLOSE by more than 1%, and….
  2. This is the first time in at least 63 trading days (3 months) in which the S&P closed higher by 1%, and…
  3. The S&P closed at a 1 year high (252 trading days).

Here are the historical cases:

  1. December 4, 1995
  2. October 14, 1993
  3. September 13, 1967
  4. April 29, 1954

Let’s look at each of these cases individually

December 4, 1995

The S&P began a 6% “small correction” more than 2 months later in February 1996.

October 14, 1993

The S&P began a 9.7% “small correction” more than 3 months later in January 1994.

September 13, 1967

The S&P began an 11.7% “small correction” less than 2 weeks later.

April 29, 1954

The S&P began a 6.8% “small correction” 10 months later in March 1955.
 

Conclusion

The 1995 case is most similar to today. Like the S&P in 1995, the S&P today has soared for more than a year. Based on this study, a “small correction” will likely begin within the next 2-3 months.

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