A monthly S&P 500 closing price which is higher than the close 4 months prior is a measure of market momentum made popular by Tom Demark. The markets often swing in approximate 9 month moves. An uptrend lasting 34 months has only happened twice since 1950. Until June of this year, The S&P 500 went 34 consecutive months with each monthly close higher than that 4 months prior. The last time the S&P 500 went this long (exactly 34 months ending July of 1956), it subsequently fell 20% over the following year. These two episodes are the longest such streaks since 1950.
Here’s a picture of this historic market momentum, now broken:
This historic momentum was discussed in: Stock Market Uptrend is the Most Overbought in 40 Years.
The S&P 500 recovered in July to record a new tick in the positive direction, however the overall back of the market’s momentum has been broken. (a 1-month false recovery also happened in 1956 before the market fell hard.)
These signals can be followed with my Trend Exhaustion Stock Market Timing Excel Spreadsheet.
I’ve been moving to cash over the last year, so am looking forward to picking up some stock market bargains if the opportunity presents itself.