Breaking Down New All-Time Highs

July 22, 2014 6:25 PM

With the SPX just a few points away from another new all-time high, I thought it’d be interesting to take a closer look at all-time highs.  

Here’s some fun trivia for you.  On September 3, 1929 the SPX closed at 31.30 and didn’t close back above that level until September 16, 1954.  That is just over 25 years or 9,144 calendar days for those scoring at home.  Makes me feel kind of bad for complaining the SPX hasn’t hit a new all-time high since July 3 or 12 trading days recently.  

So far this year, the SPX has made a new all-time high on a closing basis 25 times.  Here’s a nice chart of all the years since 1950.  

Here are the actual totals in all the years.  That 25 so far in 2014 is right about in the middle, a long ways from the record of 77 in 1995.

Now the logical question is this - is making a new all-time high bullish?  Seriously, we’ve been making a lot of new highs the past year, yet all I’ve heard is reasons to expect the market to come crashing back down.  Too far too fast, overvalued, inflation, small caps lagging, bonds leading, weak 1Q GDP print, Fed printing money, etc.  You name it and we’ve probably heard why this market was doomed.  Yet, all it does is make new highs.  

Going back to 1970, the SPX has seen 618 new closing all-time highs.  Here’s how it does after.

Up to three months out there is slight underperformance, but six months and out the SPX actually performs better after a new high than the average return.  In other words, new highs aren’t anything to be scared of - history says they are a good thing.  Don’t be scared of heights is a better way to put it.  

Thanks for reading and good luck in your trading.   

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