I have been reading lately about the somewhat energetic run on the S&P 500 – it appears as if the investment world is all a twitter over the fact that the S&P 500 is making quite a few of them. As with all things history is our best guide to whether what we are seeing is unprecedented or just part of normal market action. There are two ways to view this observation. You can either look at the number of consecutive new highs and see if that is historically abnormal or you can look at the total number of new highs within a given move. I decided to look at the first issue because this is the one that seem to have garnered so much attention. The first thing I needed to define what sort of move I was looking for these 52 week highs to occur within. I choose an unbroken 20% move from peak to trough since this is a reasonable definition of a bull market. I then counted the maximum number of consecutive 52 week highs – note I did not count all the highs merely those that occurred in an unbroken sequence. The results can be seen below.
As you can see when judged in the context of long term history the current move is not that unusual in terms of throwing up consecutive 52 week highs. History once again puts hysteria in its place.It is not unusual for markets to generate large series of runs – the bull market of the 1990’s was notable for this. What is unusual and this is something I have mentioned before is the lack of any significant pullback in the current market between these streaks of new highs. But that also has to be viewed in the context of the strength of the overall market, the perceived lack of volatility and most important whether these metrics mean anything at all.What I am certain of is that at some future date someone will drag out one of these measures and trumpeted to the world….see I told you so. But then hindsight is the worlds best investment tool.
