Higher Market Highs ?

What are the odds of still higher market highs?

By Sy Harding of the Street Smart Report
 
Saturday, July 5, 12:40. 
The market plunged in January, and recovered only into a going nowhere sideways trading range for the next three months into May. It then broke out to the upside, stalled a bit, but this week spiked up to another new high.

As a result, the first half of the year, which was looking hesitant if not toppy, has turned out to be quite positive, with the Dow now up 2.9% for the year, and the S&P 500 and Nasdaq up more than 7%.
It accomplished those new highs even with widespread warnings that valuation levels, overbought conditions, investor complacency, public investor participation (stock and fund holdings), margin debt, insider selling, corporate IPO and M&A activity, earnings growth slowing, and a long list of other conditions similar to those seen, not at previous buying opportunities, but at prior significant market tops.
It accomplished the new highs even though the economy has been stumbling, GDP plunging to negative growth of 2.9% in the 1st quarter, and expectations for the second quarter and the full year being revised down, to looking at another year of a sub-par economy, more than five years after the recession ended.
It accomplished those new highs even though the bull market has already doubled since the 2009 low, an exemplary accomplishment for a bull market under any circumstances let alone in an anemic economic recovery.
It accomplished those new highs even though everyone by now must be well aware that this has become the third longest lasting bull market in history, and is without the economic foundation of previous bull markets.

• The 1920’s bull market lasted almost 9 years in the rip-roaring economy of the ‘roaring twenties’ – and then crashed 90%.
• The 1990’s bull market lasted almost ten years in the rip-roaring economy of the 1990’s – and then plunged 50% (the Nasdaq 78%).
• The 2003-2007 bull market lasted five years – and crashed 50% in the 2007-2009 bear market and financial meltdown.

This bull market has now lasted 5.3 years.

It also accomplished these new highs in spite of the S&P 500 now having gone 1,004 days without a normal 10% correction. It’s the longest stretch without a 10% correction since the 1,127 day run from July 1984 to August 1987, 30 years ago – which ended with the 1987 crash, the S&P 500 being down 37%, scaring then also confident investors out of the market for several years.

We all recognize that it was accomplished, at least until the end of last year, by six years of unprecedented government rescue and stimulus efforts.
Yet  it has continued in the first half of this year even though the Fed is withdrawing the stimulus punchbowl, with monthly QE already cut back from $85 billion a month in December to $45 billion, and coming down at a rate of $10 billion a month.
And this year’s continuing positive activity is taking place in the market’s unfavorable season of May to October, and in the usually negative 2nd year of the Four-Year Presidential Cycle.
It can always be different this time in some areas.
As proven in 1999, investors can become even more confident, valuations (p/e ratios, etc.) can become even more extreme.
But the above is a very long list of conditions that would all have to defy the odds.



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This has been posted for Educational Purposes Only.   Do your own work and consult with Professionals before making any investment decisions. 
Past performance is not indicative of future results.