The State of the Markets:
Now that the S&P 500 has managed to move to new all-time highs, the obvious question becomes, where do we go from here?
Our furry friends in the bear camp contend that the prolonged period of consolidation that occurred between January 26 and August 24 means the current run for the roses is likely doomed to fail. The bear thinking is the January peak had been overdone and the bulls simply don't have the macro firepower to keep things going. And the fact that it took the bulls nearly 7 months to make a fresh new high is Exhibit A in the latter argument. There seems to be a general consensus that long pauses in between new highs aren't a good thing.
Those seeing the market's glass as at least half empty also suggest that seasonality, the possibility that earnings have peaked, the Fed's plans to keep raising rates, the mid-term election uncertainty, the trade war, and the President's legal issues will combine to keep stock prices from getting overly enthusiastic in the near-term.
However, if one removes the talking head chatter and the daily news flow, the actual history of long pauses between new highs in the stock market appears to be encouraging.
The History Of Long Pauses
According to Ned Davis Research Group, there have been seven prior instances where the S&P 500 experienced a long pause between new all-time highs (defined as a period of at least 6 months). So, the first point is that while long pauses between new highs aren't the norm, they are not all that unusual either.
Digging into the data, we find that once the long pause ended and the S&P 500 made a new high, the bulls tended to remain in control of the game for ...