Stocks have rarely done this before

Small-cap stocks have stolen the spotlight by enjoying a record run of days with more than a 1% daily gain. The broader market has rallied, as well, even if giving up some of those gains on an intraday basis.

Over the past 6 days, the S&P 500 has traded higher by at least 1% at some point during the day. That's the longest streak since 2011 and has been exceeded only a few times in the nearly 40 years. It was more common prior to the early 1980s.

S&P 500 up 1% for 6 straight days

Most of these streaks occurred during downtrends when volatility was higher. If we look for any time the streak lasted 6 days while the S&P was trading below its 200-day average, then we get the following.

S&P 500 up 1% for 6 straight days

These thrusts led to some back-and-forth over the short-term as buyers took a breather. By a month later, returns turned more consistently positive and they were significantly so over the next 6-12 months. 

Using a traded vehicle like a futures contract provides more accurate intraday data. Since futures were introduced in 1982, it's triggered about a dozen times and most of them were at least a temporary head-fake. 

We need to see buyers persist in the coming week(s) to give at least a little more credence to the idea that we've witnessed something other than just another bear market rally.

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We also looked at:

  • What happens when consumers' optimism about the present is much worse than expectations about the future
  • Despite a surge in stocks in April, consumers aren't very optimistic the gains will continue
  • The Russell 2000 / S&P 500 ratio is turning up
  • So is the ratio between the equal-weight S&P and the capitalization-weighted version
  • Our Optimism Index for several sector ETFs is hitting record highs
  • Some defensive sectors are seeing almost all their component stocks above their 50-day averages

The post titled Stocks have rarely done this before was originally published as on on 2020-04-30.

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