- Through last Thursday the S&P 500 traded within 3% of its all-time high for 202 straight days. That hasn’t happened in at least 50 years, if ever.
- From its January 26 high to Monday’s low the S&P 500 fell 8%. The market fell 8% or more two times in 2015, once in 2012, three times in 2011, once in 2010, once in 2009, etc.
Given the above, which one was the anomaly?
The shameful press labeled Monday’s decline as “historic” and “largest ever.” Some compared the drop to the 1987 crash. Consider this: on a percentage basis, if the 1987 crash happened today the Dow would drop 5,500 points! I don’t want to minimize the losses that we’ve seen this month, but investors should know that this is not unusual. The S&P 500 is where it was in December and back then most people seemed happy with the returns.
The incredibly strong market, one where the Dow seemingly rose 200 points every day, was the anomaly. It’s likely that this pullback will mark the beginning of a more normal market — one that both zigs and zags. Because stocks are at the upper end of their valuations, the zags should be expected. When they happen the perma-bears will be paraded on CNBC and other financial networks. It’s scary, but we’ve seen this many times before.
Our key technical indicator that has a history of calling major market tops didn’t come close to giving a sell signal. It’s still a bull market, but it is one that should now behave like a normal bull market instead of a bitcoin style parabolic advance.
Please let me know if you have any questions.