An impressive win streak for the S&P 500 suggests more upside 

Key points:

• The S&P 500 has now closed above its 200-day average for 242 consecutive sessions
• Similar win streaks saw the S&P 500 rise 85% of the time over six months
• Current market breadth indicators suggest a healthier environment than other signal date periods

Consistent uptrends tend to go higher and longer than most expect

The S&P 500 has closed 242 consecutive sessions above its 200-day moving average. While nothing is critical about this particular number of days, it just happened to be an observation I made over the weekend: consistent momentum of this type has historically led to further upside in the world's most benchmarked index. 

The previous signal occurred in June 2021, and the S&P 500 gained 10.7% over six months. 

As shown in the chart below, the S&P 500 delivers an annualized return of 9.8% when the win streak count surpasses 242 sessions. Conversely, when the streak resides below 242 days, the index yields an annualized return of 8.1%.

Comparable win streaks preceded additional upside for stocks

Whenever the S&P 500 closed above its 200-day average for 242 straight sessions, with the index less than 3% below a record high, the world's most benchmarked index rose 85% of the time over the ensuing six months. 

Although none of the time horizons showed significance compared to random returns, the consistency observed from two weeks to 12 months easily surpassed historical norms, indicating a sustainable uptrend despite what might seem like a long period above the 200-day average. 

Over the subsequent six months, the S&P 500 experienced just one instance of a maximum loss exceeding 10% and only two precedents surpassing that same downside risk over the following year. 

Historical perspective

As of the close on October 18, 2024, four out of five market breadth indicators showed more robust participation than the average of all other signals, indicating a more favorable backdrop for the S&P 500 than in previous periods. 

What the research tells us...

Stock indexes continue to grind higher, fueled by improving market breadth and consistent price momentum. In such environments, where nearly all indicators align-whether through expanding new highs, stocks trading above key moving averages, or bullish leadership in cyclical groups-it's tempting to believe that the market can't go any higher. Yet, history shows that markets often defy these expectations, pushing higher for longer than most investors anticipate. While a consolidation around the election is possible, the big picture heading into the most seasonally strong period of the year suggests investors continue to give the market the benefit of the doubt.