S&P 500 Has Only Done This 14 Times Since 1950

A good short-term buying opportunity could be ahead

Senior Quantitative Analyst
Mar 27, 2024 at 8:17 AM
facebook X logo linkedin


The percentage of bullish newsletters from the Investor Intelligence (II) poll was above 60% in the latest report. This is the first reading above 60% since July 2021, and it's an extreme one -- registering in the 95th percentile for percentage of bulls dating back to 1971.

The tables below compare how the S&P 500 Index (SPX) has performed after newsletters are extremely bullish or bearish. The poll has been a reliable long-term contrarian indicator. When bulls are extremely high, the SPX averages a 6.8% return over the next 12 months, with 68% of the returns positive. When there’s a dearth of bullish newsletters, the index averages a return of 14%, with 80% of the readings positive.

Prior Instances

The last time the SPX closed more than 3% away from its all-time high was in mid-December. Since 1950, there have been 14 prior streaks like that. The table below summarizes the index returns after these streaks. The second table is a benchmark showing typical returns since 1959, the year of the first signal.

Based on these figures, the next three months could be a slog. The SPX averaged a loss of 1.85% over the next three months after these streaks, with just half of the returns positive. Typically, you would expect a 2% gain, with a 66% chance of being positive. On the bright side, the underperformance hasn’t lasted much more than three months. The six and 12-month returns are close to the typical market returns.

iotw1mar26

The table below lists the dates of the 70-day streaks where the SPX did not close more than 3% below its all-time high. There's nothing I see that is particularly unique about the current streak. The Cboe Market Volatility Index (VIX) reading of just over 13 and a 12% return looks in line with most of the other data points.

iotw2mar26

Finally, this last table shows how the SPX performed after the streak ended. For reference, these streaks ended after an average of 113 trading days (43 more trading days, or about two months) and with a median of 92 days (22 more trading days, or about a month).

The summary is interesting in that once the streak ends, it has made for a good short-term buying opportunity, with the index gaining 1.75% on average over the next month, with 71% of the returns positive. A couple of big pullbacks in the data at that point lead to an average three-month return that’s below breakeven. Again, the longer-term six and 12-month returns seem unaffected by these streaks.  

iotw3mar26

 

Target Effortless Triple-Digit Gains Every Sunday Evening For Life!

This is your chance to triple your profit potential on Sunday evenings, without spending all your free time watching the market.

On Sundays, as a Weekend Plus subscriber, you’ll get up to 6 trades every Sunday, each targeting gains of 200% or more.

Start targeting gains like the ones our subscribers have seen recently, including:

213.3% GAIN on AutoNation calls
100.0% GAIN on Monster Beverage calls
100.4% GAIN on Walgreens Boots Alliance puts
100.4% GAIN on ON Semiconductor calls
257.7% GAIN on Dell calls

101.0% GAIN on Apollo Global Management calls
103.6% GAIN on JP Morgan  Chase calls
105.3% GAIN on DraftKings calls
101.3% GAIN on Airbnb calls
203.0% GAIN on Shopify calls
102.0% GAIN on Cboe Global Markets calls
100.9% GAIN on Boeing calls
102.1% GAIN on Microsoft puts
102.3% GAIN on First Solar calls
101.5% GAIN on PulteGroup calls
101.0% GAIN on Apple calls
209.4% GAIN on NXP Semiconductors calls
100.8% GAIN on Uber Technologies calls
100.4% GAIN on Academy Sports and Outdoors puts
102.2% GAIN on Trade Desk calls
100.8% GAIN on DoorDash calls
100.0% GAIN on Camping World Holdings puts
100.0% GAIN on Cboe Global Markets calls
100.2% GAIN on C3.ai calls
238.5% GAIN on Oracle calls

 
 
 


 
 

Rainmaker Ads CGI