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The mainstream financial press would like us to believe that because the S&P 500 
and Dow 30 are at or near their record highs that it must mean we’re nearing the end of the current bull market and, as such, now must be a terrible time to buy stocks. Let’s not jump to any conclusions, though. Instead, let’s do our own due diligence to find out. Hint: If you’ve been stuffing cash under the mattress since the last market crash, you might want to finally go deposit it in your brokerage account. Here’s why… Words: 420
So writes Louis Basenese (www.wallstreetdaily.com) in edited excerpts from his original article* entitled The Costliest Myth About Bull Markets.
This article is presented compliments of www.munKNEE.com (Your Key to Making Money!) and may have been edited ([ ]), abridged (…) and/or reformatted (some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. Please note that this paragraph must be included in any article re-posting to avoid copyright infringement.
Basenese goes on to say in further edited excerpts:
The number crunchers over at Ned Davis Research wondered what happens when the S&P 500 Index hits new all-time highs, too and, believe it or not, it’s happened 13 times since 1950. Now, if 13 is an unlucky number for you, it’s important to note that the findings are anything but ominous. You see, after bull markets reach record highs, the rally tends to continue for another 644 days, on average. That’s almost two full years. Better yet, it translates into another 40.3% in profits. Like I said, there’s nothing ominous about that.
Other studies, including one by our colleagues over at Stansberry Research, come to similar conclusions. After analyzing almost a century’s worth of weekly data on the S&P 500 Index, Dr. Steve Sjuggerud found that the Index rises an average of 9.2% in the 12 months after hitting a new 52-week high. Granted, 9.2% isn’t nearly as much as 40.3% but it’s still a respectable gain – and it sure beats the alternative.
[Were]…we to extend our analysis to examine the performance of individual stocks hitting new highs we would find that the same phenomenon holds true thanks again to the statistical enlightenment of Ned Davis Research.The firm studied the High Low Logic Index, which tracks the number of new 52-week highs and new 52-week lows – each expressed as a percentage of the total number of stocks traded- and found that bull markets peak, on average, about 30 weeks after the new 52-week highs top out. This means that the bull market should last at least until August.
Bottom line:
While history is never guaranteed to repeat itself, it’s the only guidebook we’ve got, and based on the data, it’s not too late to invest in the current bull market even if the major market indices hit all-time highs – so don’t believe the myth that record highs indicate a market top.
Editor’s Note: The author’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article. Furthermore, the views, conclusions and any recommendations offered in this article are not to be construed as an endorsement of such by the editor.
*http://www.wallstreetdaily.com/2013/03/04/myth-about-bull-markets/
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