How Long Will This Stock Market Momentum Last?

Last week marked 8 consecutive weeks of gains for the S&P 500 Index (SPX). It’s the 20th specified winning streak for the scale since 1950. The array beneath summarizes the SPX show going guardant aft the different streaks.

I’ve been doing this for immoderate clip now, and traders thin to get tense during specified winning streaks oregon erstwhile there’s an overbought indicator flashing. But past I tally the numbers and they amusement momentum leads to much momentum, with guardant returns aft a awesome beating emblematic marketplace returns.

The information below, however, does suggest this is simply a communal clip for the SPX to instrumentality a abbreviated breather. The next-week results aft 8 consecutive weeks of gains shows affirmative returns conscionable astir fractional the time, and a flimsy nonaccomplishment connected average. But past the momentum tends to prime backmost up, with 1 and three-month returns aft the streaks beating their accustomed return. For example, the period aft the winning streaks, the SPX was up connected mean 1.15% with 74% of the returns positive. Typically, the SPX averages a instrumentality of 0.7% for that timeframe, with 61% of returns positive. Six months aft an eight-week triumph streak, the returns look much similar emblematic marketplace returns.

Even aft 8 weeks of gains, sentiment surveys aren’t showing a batch of optimism. In the remainder of the article, I’ll amusement the idiosyncratic streaks -- on with 2 sentiment surveys -- astatine the clip they occurred to spot if that changes anything. I’ll besides look astatine immoderate idiosyncratic stocks besides connected a play triumph streak, including Apple (AAPL), to spot if they thin to clasp up aft their ain streaks.

Streaks and Sentiments

The array beneath lists the idiosyncratic eight-week triumph streaks since 1950. I besides amusement accusation connected 2 sentiment polls. One is the Investors Intelligence (II) canvass successful which the editors cod implicit 100 published marketplace newsletters and find the percent that are bullish, bearish, oregon expecting a correction (short-term bearish but longer word bullish). The 2nd 1 is simply a play survey of its members by the American Association of Individual Investors (AAII). Members are asked their sentiment connected wherever they spot the marketplace heading implicit the adjacent six months.

The array shows the AAII canvass is negative, meaning determination are much bears successful their rank than bulls. We person canvass information since 1987, and there’s been 9 streaks since then. This is the 2nd clip the AAII canvass had much bears than bulls successful the survey arsenic the SPX play triumph streak deed eight. The different clip was successful September of 1993. A contrarian would fishy bullish implications successful this situation, but that was not the case. The SPX was up little than 0.5% aft 3 months and hardly up 1% implicit the adjacent six months.