Stocks Haven't Done This for More Than 6 Months

The bears tried. They failed but seem to be making another run today.

After letting some air out of Tech stocks and some former highfliers, bulls have made a stand and kept the broader market steady. Once again, sellers failed to push the S&P 500 down even 5% from its peak. It got close last week but held above that threshold.

S&P 500 drawdown less than 5%

The index has now gone 134 trading days without a 5% pullback. That's the 18th-longest streak since 1928, and it would take only a few more days to push it into 15th place. 

Once it got this extended, the S&P's returns over the next month were poor. Even up to 3 months later, its risk outweighed its reward. But as we've seen with so many momentum studies, when buyers have been so persistent, they didn't give up easily, and there were few large declines to speak of. 

The Risk/Reward table highlights those signals when the index fell more than 10% from the signal date. Only 2 out of the 17 signals suffered that fate within the first 3 months.

Stat Box

Thanks to the uptick in gold, 94% of gold mining stocks recently traded above their 50-day moving averages. That's the most since August 10th of last year. Our Backtest Engine, which goes back to 1993 for breadth on gold mining stocks, shows a flat 6-month return in the Gold Bugs index when so many stocks were above their 50-day averages.

What else we're looking at

  • Full details following 134 days without a 5% pullback
  • What happens when the Technology sector is leading to the downside
  • Inflation is becoming more of an issue - what that's meant for Technology stocks
  • Looking at a new Risk Off Composite Model and where it stands today

The post titled Stocks Haven't Done This for More Than 6 Months was originally published as on on 2021-05-20.

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