Simple and Proven S&P 500 Indicator for Long-Term Bulls

The SPX hit its first 52-week high since the first trading day of 2022

Senior Quantitative Analyst
Jun 14, 2023 at 8:00 AM
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After several weeks of trading sideways, the S&P 500 Index (SPX) recently overtook the peak from August 2022 to make a new 52-week high. This is the first 52-week high for the index since the first trading day of 2022.

This is a simple indicator, but 52-week highs have been a buy signal for stocks, and the signal has been especially strong when investors have been waiting so long for it.

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Buy New Highs

The table below summarizes SPX returns after the index marked its first 52-week high in at least three months. The short-term returns are bullish, with the index adding 1.42% on average after the first month, with 73% of returns positive. The typical one-month return for the index was 0.73%,with 61% of the returns positive.

The three-month return after a high is close to your typical return, but then we see outperformance again in the six-month and one-year returns. Specifically, 12 months after a signal, the SPX averaged a gain of 11.65%, with 83% of these returns positive, compared to the typical market with a 8.95% return and 74% positive.

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As investors wait for a new high, buying pressure builds. The longer they wait, the more investors seem to line up to buy stocks, based on the data below. I separated the signals above by how long it had been since the last new high. The first table shows how the SPX did going forward if it was the first new high in at least one year. That’s the case with the recent new high, which has been a bullish signal for stocks, especially in the longer term.

In the 15 instances when a new 52-week high occurred and it was the first one in over a year, the SPX averaged a gain of 4.76% over the next three months, with 87% of the returns positive. One year after a signal, the index averaged an impressive return of 17.46% and all 15 returns positive. It’s a simple indicator, but you won’t find many others with that good of a track record.

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