Stocks Just Did This for the First Time in 4 Years
The S&P 500 Index (SPX) on Monday notched a gain of more than 1%, after rallying on Friday. It marked the index's first back-to-back gains of that magnitude since June 2016. The last time the SPX went at least a year without consecutive gains was in February 2014, four years ago, according to Schaeffer's Senior Quantitative Analyst Rocky White. Here's what that could mean for the stock market in the short term.
Longest Stretch Between Back-to-Back 1% Gains Since 2007
It was 405 trading sessions between the S&P's consecutive 1% gains -- the longest stretch since September 2007, near the start of the financial crisis. The longest ever stretch happened in the early-to-mid-1960s, when the SPX went 961 sessions -- or nearly four years -- between back-to-back gains of at least 1%.
Short-Term Speed Bumps Ahead?
There have been just 12 other stretches of this kind since 1954. The following day, the S&P averaged a loss of 0.27%, and was positive just half the time. That's compared to an average anytime gain of 0.03%, with a slightly better win rate of 53.5%, looking at data since 1954. One week later, the index was down 0.2%, on average, and higher only 41.7% of the time -- compared to an average anytime gain of 0.17%, with a win rate of 56.4%.
However, while the SPX tends to underperform in the short term, three months after these signals, the index generated a stronger-than-usual average return of 3.27%, and was higher two-thirds of the time. Not to mention that after the most recent signal in 2014, the S&P outperformed across the board, and rallied 4.53% in the subsequent three months. Plus, a separate stock market indicator recently pointed to outperformance for the SPX in 2018.
