Five for Five!

The S&P 500 and the Dow Jones didn’t miss a single opportunity to record gains on each and every trading day last week. 5 for 5! Besides Thursday, when the shakeup at the opening bell righted by the time the market closed, it was another week with one-sided upward movement. In summary for the week, the S&P 500 climbed 0.9%, and the Dow Jones rallied 1.92% to the 23,329 point level, thanks to a surge of over 10% last week in the stock of IBM. In the mix, the Dow managed to surpass the 23,000 point level for the first time ever, making it the 6th time the Dow has reached a new 1,000 point benchmark in the last 12 months!

 

Misses in earnings numbers, growing debt warnings from China, and the worst trading day in Apple (AAPL) since August… and what did the S&P 500 do?! It rose for the 6th straight trading week! It seems – of late – that it doesn’t really matter what happens, the American stock market has found the way to notch off new highs, and at an unprecedented pace at that.

 

The NASDAQ has closed at all-time highs 62 times year-to-date, at a pace similar to that of 1999, which produced the most all-time highs ever on the index. The S&P 500 and the Dow also closed at highs of their own last week.

 

The frustration in the bearish camp is picking up, all the more so in light of the fact that the market hasn’t even recorded the most minimal price correction of 3% in over a year. Investors have been ignoring bad news, which has oscillated from North Kora to non-stop drama in the White House, and all of this has unfolded in what could be the biggest slowdown in the earnings season in 6 years. And the market hasn’t blinked.

 

On the flipside, to imagine that the market is going to go into freefall simply because it’s been grazing all-time highs for some time now, is laughable. The S&P 500 has recorded 49 new highs this year, and from that vantage point, only 5 years ever have been more productive. In each of these instances – besides one – stocks continued rallying in the following year as well, recording on average, 20 more new historic highs.

 

Despite the dizzying pace at which new highs have been recorded on all of the indexes, this doesn’t prophecy bad things to come from hereon in. Investors who think that the second we turn the corner the market’s going to nosedive are prone to nothing more than superstition – and frustration at having missed the boat. In effect, buying stocks when the S&P 500 has traded at highs has proved itself wise. Since the end of WWII in 1945, in 38 calendar years, the S&P 500 traded at continual highs. In other words, 53% of the time, the S&P 500 traded at higher highs than those priorly recorded. Twelve months after having closed at a high, the index was trading up 72% of the time.

 

Not only is the consistency of the present trend very impressive but the narrowness of the trading range and the lack in volatility have also seen highs never before seen. New highs continue to pile up, hand-in-hand with slow intraday movement. It’s a weird mix of movement, but there’s nothing out there that signals that something’s going to change.

 

 

The pace of the earnings season is sure to pick up with heavyweights like Intel (INTC), Amgen (AMGN), and Microsoft (MSFT), all of which are expected to report this coming week. President Trump is also expected to announce the next Fed Chair.

 

With the bull run paving the way to higher and higher levels, the market isn’t even phased by numbers that come out weak. That was the case last week with the big misses from General Electric (GE) and Procter & Gamble (PG), and it’s hard to entertain what news event would be needed to derail the market. It could be that momentum is slow, but it’s steamrolled everything in its path.

 

It seems to many investors that the one-sided movement we’re seeing is absurd, and unstable, but the very same claims could have been voiced innumerable times over the last two years. There’s no alternative but to follow the uptrend and keep on top of price movements.  When the wheels start to squeak we’ll see it on the charts.

 

Have a great trading week!