I’ve often said I believe ‘news is noise’, so it should come as no surprise to me that when the granddaddy traditional benchmark of the US market, the Dow, makes an all time high, you see some pretty lazy reporting by the media masquerading as journalism.
I’ve been bemused to see some articles over the last 24 hours that by using the extreme examples of 1987, 2000, and 2007 were attempting to prove that when the Dow makes an all time high it’s bearish because the market sinks sharply soon after. Of course what they didn’t tell you is they are only able to identify those extreme examples with the considerable benefit of hindsight. And those weren’t bull markets that ended as soon as the previous all time highs was surpassed, they were bull markets years in the making that went way beyond their previous highs.
Obviously you can never know you are at the final all time high until some distance and time has been spent away from that level. They failed to mention or even comprehend there were dozens, indeed hundreds, of days before those respective highs that were also all time highs when they were first attained. How about every all time high between 1989 and 2000 for example? There were over 300 of them. Were all of those bearish? Of course not.
Last weekend Josh Brown relayed an article by Mark Hulbert of Marketwatch on a Ned Davis report, that showed in the 13 instances where following a bear market the S&P 500 reached a new high, on average, the bull market continued for another 644 days, and gained an additional 40.3%. Granted, there are only 13 instances to draw from, but even in the median case, the bull market lasted more than another year and gained over 18%.
Bull markets end when there’s no-one left to sell to, when everyone is invested and they are so confident they become complacent. There is nothing to suggest any complacency here. The opposite in fact.
Ralph Acampora, CMT, the veteran technical analyst and founder of the Market Technicians Association commented after yesterday’s historic close that “This is still the ‘most hated’ bull market I have ever seen in my, close to 50 years in this business. This ‘disbelief’ is very bullish.”
He’s absolutely right. I only have 25 years in markets compared to Ralph’s 50, but I too found the lack of overall celebration or fanfare that has previously accompanied such milestones palpable. Skepticism is rife. Fed by a chastened Wall St and financial media after the failings of 2008, people believe that despite all time highs they must stay cautious, concerns remain, Europe, China, Sequester, blah, blah, blah, noise, noise, noise.
Is it any wonder then that 4 years into this rally from the March 2009 lows, people still have a problem accepting that this is a bull market, instead of some massive countertrend. The same analysts that failed to warn or protect you from the savage bear of 2008, are now avoiding any such trouble again by keeping you on the sidelines.
The fact is, new highs are bullish, all time highs even more so.
When a stock or a market is at new highs, it’s already doing what you want it to do, it’s going up. When it’s at all-time highs, think about what that means: there are no unhappy holders. None.
In fact, the only people who are unhappy are those who are short, and we call those ‘guaranteed buyers’ as eventually they’ll have to cover, and hopefully at even higher prices.
S&P 500 Performance Following New Bull Market Highs (The Reformed Broker)