The S&P 500 spent almost two full years, between the fall of 2012 and this past September, above its 200-day moving average. For 475 consecutive trading days, stocks remained in a pristine, untouched uptrend – the longest such event in stock market history.
And now it’s over.
The type of behavior you were rewarded for in the period may not be quite as rewarding going forward. It was a once in a lifetime tape and, understandably, people have a hard time accepting that. They still want to believe it’s 2013 – that incredible confluence of improving earnings, ameliorating sentiment and endless stimulus – but it’s not. I said this on the blog the other day and people got angry (see: Why Did The Stock Market Plummet Today?). I said this on the air yesterday and the response was incredulity (see the clip: The Halftime Report).
I get it. Old habits die hard and, well, goddamn that was fun. Every two percent dip was a a gift and every four percent pullback was a screaming buy. Good news was good and bad news was even better. Defensive utilities and growthy tech stocks could lead a rally together one day and then tag in the seemingly opposed energy and consumer discretionary stocks to co-sponsor a rally the next day. It was nirvana, heaven on earth. All you had to do was show up and shut up, your portfolio would grind out a gain every week.
By this summer, it became apparent to anyone looking at internals or international stocks that this period was drawing to a close and the game was changing. The divergences had piled up and the new highs list had been gnawed down to a nub. The S&P 500’s best 50 stocks drove the price indices higher, even while, one by one, every other stock succumbed. We spent the last few weeks on borrowed time but no one wanted to admit it. Even as rallies rolled over and breakouts became fakeouts in the hottest individual names (GoPro! Tesla! Mobileye!), there was a hesitation to acknowledge it. A difficulty saying goodbye.
And who can blame us? Why would you want to believe you couldn’t have Christmas and the Fourth of July every day, forever? It was a tantalizing prospect and it began to feel possible – even plausible!
But now it’s over.
There she goes, my beautiful world.
It’s a new phase, like it or not. Don’t get me wrong – we’ll still get glimmers of her. Those 90-percent up-days where stocks go ballistic and scream into the close. Those 3:30pm ramps after a tough day slugging it out with the sellers. Those algo-driven bursts that confuse us into thinking everyone else is getting back on the horse and we’d better catch up. It’ll happen.
But it will not be the same as it was. The Relentless Bid era has come to a close. This is the next era, it’s already begun.
No one can see these things coming far in advance. But some of us are willing to call them what they are.
Tell ’em, Nick: