It’s been quite a run for the S&P 500 over the last several weeks, and the chart below illustrates just how consistent the equity market’s strength has been. The chart comes from the second page of our daily Morning Lineup report, which is available to all Bespoke Premium and Institutional clients. In it, we show the S&P 500’s daily close relative to its 50-day moving average (DMA) where overbought levels are considered to be readings where the S&P 500 closes one or more standard deviations above its 50-DMA, while oversold levels are readings where the S&P 500 closes one or more standard deviations below its 50-DMA. As shown in the chart, ever since September, a period now covering 42 trading days, the S&P 500 has closed at either an overbought or extreme overbought level.
Looking at the chart, the current streak of overbought closes is easily the longest of the last year, but looking further back at the current bull market, there have only been three other periods where the S&P 500 closed at overbought levels for 40 or more trading days. The chart below shows the S&P 500 through the course of the entire bull market dating back to March 2009. As shown, two of those prior streaks occurred within ten trading days of each other when a 45 trading day streak ended on 11/12/10 and another one began on 12/1/00. Besides those two streaks, the only other streak of 40 or more trading days was back in early 2012 when a 43 trading day streak came to an end in March 2012. Finally, while it may be hard to see on the chart, in both the one and six months that followed these prior streaks coming to an end, the S&P 500 was up all three times. Three months later the S&P 500 was up two out of three times with the one down period coming after the March 2012 streak when we saw a decline of 5.8%.