Did Today’s Rally Mark The End Of The Bull Market?
We having fun yet? The Dow sported its third largest point gain ever and the S&P 500 had its best day since November 2011.
It is important to point out that largest point move isn’t the same as largest percent move. Below are the 10 largest point moves for the Dow since 1900 and you can see that today’s 3.95% rally is actually the smallest. In fact, out of 29,347 trading days since 1900, today’s 3.95% rally put it at the 131st largest percentage move ever. Nothing to sneeze at, but not quite as sexy as ‘third largest move’ ever.
None the less, August 2015 is quickly becoming a month no one will ever forget. Something happened today that I’ve long said could be a warning sign to the bullish trend. We had our first 3% up day in 938 days for the S&P 500. Like the sleeping bull in the pic above, will the market be able to wake up? Or will it stay back down now that volatility is coming back?
For years now I’ve been called a perma-bull (which I am fine with in a bull market), but I’ve half-joked that the bull will be over once we actually have a 3% UP day. The reason being, bull markets tend to climb a slow and steady wall. Big volatile days aren’t hallmarks of healthy bull markets. Here’s the chart of the longest streaks without a 3% rally.
Think about this, 2013 was one of the best years ever for the S&P 500 - up nearly 30%. It only had 21 1% gains for the entire year. 2015 after today has 21 1% gains. 2008 was one of the worst years ever and it had 59 1% gains. In other words, a bunch of big up days aren’t always a good thing.
So is this the end of the bull? I still say no, but clearly it is a sign it could be getting near the later innings. The economy is still improving and overall sentiment is extremely skeptical. As you know, I’m a big sentiment guy and I LOVE the fact the Investors Intelligence bulls just came in at a new five year low. From a contrarian point of view, that shows us just how much fear is out there. Any good news, or less bad news, could spark a furious rally back higher.
So back to my original question. Does a 3% up day mark the end of the bull? Here are the other longest streaks without a 3% up day and how the S&P 500 performed after that first 3% up day. A median return of 3% in three months and 7.5% in six months would probably be very well received right about now. Seeing this makes me feel a little bit better.
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