Is Another Crash Coming?

It may seem hard to believe but the big S&P 500 Index is just 6% or so from all-time highs.

Other big indexes — like the tech-centric Nasdaq Composite — are already putting in record highs this summer.

That begs the question: How long can stocks stay at those lofty levels?

The answer may surprise you!

Turns out all-time highs aren’t a rare anomaly for the stock market. In fact, they’re the market’s “normal mode.”

The S&P 500 has spent about 60% of all trading sessions within 10% of an all-time high over the past six decades.

Contrary to popular belief, stocks don’t start some kind of crash-countdown timer once a new high-water-mark gets set in the S&P 500.

Have a look at the chart:

In the chart above, trading sessions within 10% of all-time highs are in green. Everything else is in red.

It’s not hard to see why investors are skeptical of record highs in stocks. Between about 2000 and 2013 — formative years for many folks in the market today — new highs were actually pretty fleeting. But zoom out over the much longer term and it’s clear that stretch was the rarity.

Here’s the takeaway: Markets can stay at record highs a lot longer than most investors are comfortable with.

And in the context of 2020’s conflicted market conditions, the takeaway is the same as it’s been for a while now: Keep on buying what’s working.

At this point, new all-time highs in the S&P 500 are just a few trading sessions away. And when they come, there’s going to be a push for some folks to try to figure out when the next crash is coming.

That’s a mistake.

One of my colleagues recently made a tongue-in-cheek comment that says all you need to know about the market right now: “What do we know about all-time highs? We know we don’t usually see them happen in downtrends.”

Some of the biggest gains in market cycles come during the final stages of a bull market. And with the Fed pumping cash into this market at a furious rate, there’s no telling when this bull will start to cool.

Better yet, as I’ve shared, buying what’s working in crisis investing environments is a strategy that can help you skirt 97% of the worst performing stocks in any given month.

That’s good reason to keep your focus on the tech sector this summer!

Sincerely,

ray

Jonas Elmerraji, CMT

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Jonas Elmerraji

Jonas Elmerraji, CMT, is Seven Figure Publishing's in house quantitative analyst. He is also a contributor to Technology Profits Daily. Jonas has been with Agora Financial/Seven Figure Publishing since 2009. In 2017, his proprietary trading strategy beat the markets by over 20%.

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