76 Days And Counting: Tin Foil Hat Update, Mark
A few moments to spare so I thought I'd make a quick post on something I have mentioned a few times. We are on a very long streak without a 1% daily correction in the S&P 500 and the last two times led to significant sell offs. We officially passed the prior record this cycle a few weeks ago and are on the 76th day. It is also interesting to note we are currently on the longest march since 1990 (The last date I checked) without a single day 2% correction in the S&P 500. Talk about volatility drying up.
With economic data coming in below trend, I'm not sure the probabilities exist that this will continue.
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Update. JKW comments on this interesting or some may think ominous statistic I am moving to the front page of this post:
This is the longest without a 2% correction in SPX since at least 1950 (using closing prices from yahoo). The second longest was 806 days ending Oct 30, 1978. There are a total of 8 times (including this one) where it has been over 400 days. The long trend final days are:
now
Oct 30, 1978
Jan 7, 1986
May 11, 1973
Aug 25, 1966
Jul 25, 1969
Mar 7, 1996
Aug 7, 1959
Some of these were good times to buy, some of them were bad times to buy. It looks like 3 of them are near peaks, 2 are near troughs, 2 are on the way up, and this one can't be determined yet. Only 2 of them look like they were actually a bad time to buy. Looking at the statistics on DJI, it looks like a 2% correction after a long period without one signifies a change from one of up, down, trendless to another, but does not provide by itself any clear indication of which one it will change to. The exception seems to be that you can get a 2% correction in the middle of a long uptrend.
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Anyone else see anything spooky here? Let's look at JKW's stats from a cyclical bull or bear perspective. That rules out all but 1978 and 1973 for comparative purposes. Then let's look at the macro environment. Transitioning from a secular bullish bond environment in 1973. That rules out 1978 as today we are transitioning from a secular bullish bond environment to ..... TBD. May 11th, 1973 is our magic date.
So, when did the global markets start selling off this year? That's right. May 11th, 2006. What was the significance of that rally without a normal correction in 1973? Well, folks, it was the end of a failed upside rally after the market had peaked in January of that year. And, when did the NDX peak this year? That's right. January of 2006. I actually had a prior post dated October 3rd and titled "The Q's" where I circled that peak and said it was a primer. The exact quote from that post was "That move was used to prime the average investor into chasing everything from penny stocks to pink sheet stocks to blow offs in oils, metals, transports, brokers, emerging markets, etc. Likely the wave 5 of this bull market's leaders. During that rally into May, the big money was dumping ALOT of shares. I gave a few hints of this in some posts I made on other blogs as it was happening. The last time that happened? The outcome was very ugly. "
From a cycles perspective, that bull market cycle in 1973 was the first bull cycle in a secular bear market. Equities has sold off in 1969-1970 after reaching the highest valuation since the Great Depression. And, what of 2000? The highest valuation ever. And this cycle? First cycle in a secular bear market. So, same cycle as 1973 from that perspective.
If memory serves me well, 1969 was when a young buy & hold (hardee har har. Or if you prefer, Hardy Har Har.) Warren Buffett urged his clients to sell stocks because of overvaluation. One of the infamous Wile E. Coyote's timed investment decisions. Did you know he bought a massive amount of silver pre-2000 and sold it at the silver peak in May of 2006 as I recall. Don't believe his buy & hold mumbo jumbo. Buffett is not a country bumpkin. He is a brilliant market sage and a market timer whether it be buying stocks, bonds, companies, commodities or currencies.
And, what happened post May 11th, 1974? Das ist NOT goot. They cratered. When? Starting in NOVEMBER. And, what was the S&P PE in 1973? 18ish just like today. The perma-bulls now tell us how cheeeeaaaaappppp the market is. When did markets bottom in that cycle? October of the following year? When have I repeatedly said we would see an equity market bottom? October of the following year. ie, 2008.
When did Warren Buffett say he felt like a kid in a candy store when he was buying stocks on the cheap? (Not his direct quote.) October of 1974. That is when Buffett set his life in motion to make him the richest investor ever. Now that is one hell of a spooky Halloween treat. What would really be spooky is if it came to pass.
With economic data coming in below trend, I'm not sure the probabilities exist that this will continue.
+++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Update. JKW comments on this interesting or some may think ominous statistic I am moving to the front page of this post:
This is the longest without a 2% correction in SPX since at least 1950 (using closing prices from yahoo). The second longest was 806 days ending Oct 30, 1978. There are a total of 8 times (including this one) where it has been over 400 days. The long trend final days are:
now
Oct 30, 1978
Jan 7, 1986
May 11, 1973
Aug 25, 1966
Jul 25, 1969
Mar 7, 1996
Aug 7, 1959
Some of these were good times to buy, some of them were bad times to buy. It looks like 3 of them are near peaks, 2 are near troughs, 2 are on the way up, and this one can't be determined yet. Only 2 of them look like they were actually a bad time to buy. Looking at the statistics on DJI, it looks like a 2% correction after a long period without one signifies a change from one of up, down, trendless to another, but does not provide by itself any clear indication of which one it will change to. The exception seems to be that you can get a 2% correction in the middle of a long uptrend.
+++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Anyone else see anything spooky here? Let's look at JKW's stats from a cyclical bull or bear perspective. That rules out all but 1978 and 1973 for comparative purposes. Then let's look at the macro environment. Transitioning from a secular bullish bond environment in 1973. That rules out 1978 as today we are transitioning from a secular bullish bond environment to ..... TBD. May 11th, 1973 is our magic date.
So, when did the global markets start selling off this year? That's right. May 11th, 2006. What was the significance of that rally without a normal correction in 1973? Well, folks, it was the end of a failed upside rally after the market had peaked in January of that year. And, when did the NDX peak this year? That's right. January of 2006. I actually had a prior post dated October 3rd and titled "The Q's" where I circled that peak and said it was a primer. The exact quote from that post was "That move was used to prime the average investor into chasing everything from penny stocks to pink sheet stocks to blow offs in oils, metals, transports, brokers, emerging markets, etc. Likely the wave 5 of this bull market's leaders. During that rally into May, the big money was dumping ALOT of shares. I gave a few hints of this in some posts I made on other blogs as it was happening. The last time that happened? The outcome was very ugly. "
From a cycles perspective, that bull market cycle in 1973 was the first bull cycle in a secular bear market. Equities has sold off in 1969-1970 after reaching the highest valuation since the Great Depression. And, what of 2000? The highest valuation ever. And this cycle? First cycle in a secular bear market. So, same cycle as 1973 from that perspective.
If memory serves me well, 1969 was when a young buy & hold (hardee har har. Or if you prefer, Hardy Har Har.) Warren Buffett urged his clients to sell stocks because of overvaluation. One of the infamous Wile E. Coyote's timed investment decisions. Did you know he bought a massive amount of silver pre-2000 and sold it at the silver peak in May of 2006 as I recall. Don't believe his buy & hold mumbo jumbo. Buffett is not a country bumpkin. He is a brilliant market sage and a market timer whether it be buying stocks, bonds, companies, commodities or currencies.
And, what happened post May 11th, 1974? Das ist NOT goot. They cratered. When? Starting in NOVEMBER. And, what was the S&P PE in 1973? 18ish just like today. The perma-bulls now tell us how cheeeeaaaaappppp the market is. When did markets bottom in that cycle? October of the following year? When have I repeatedly said we would see an equity market bottom? October of the following year. ie, 2008.
When did Warren Buffett say he felt like a kid in a candy store when he was buying stocks on the cheap? (Not his direct quote.) October of 1974. That is when Buffett set his life in motion to make him the richest investor ever. Now that is one hell of a spooky Halloween treat. What would really be spooky is if it came to pass.
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