Money is Only Made at New Highs

Money is Only Made at New Highs

Posted on January 16, 2018

Market State 1: Bullish/Rational (92 trading days):
The Portfolio Thermostat operating system identifies the characteristics of 12 different market environments called “Market States.” Market State 1 has come into play 251 times since 12/31/1949. The current 92 day run ranks as the 8th longest. The vast majority of new highs occur in Market State 1. In fact, 40 new highs have been registered over the current 92 day streak.
Canterbury Volatility Index (CVI 34): Market volatility remained unchanged from the prior week. Volatility of CVI 45 or lower, is at an extremely low level.

The current rally arguably started on the day before the Presidential election. As can be seen in the chart below, the S&P 500 closed at a low of 2085 on 11/04/2016 which was 4 points lower than it was almost two years prior on 12/26/2014 at 2089.
The many market experts continue to talk about the current bull market as being “long in the tooth.” They mark the beginning of the bull market from the S&P 500 bottom at 676 on March 9/2009. They fail to mention that the S&P 500 had just declined by about -55% from the previous high at 1565 on October 9, 2007. In fact, it took the S&P 500 over 5 years and 8 months to recover the losses (S&P 500 1573 on June 24, 2013).

Money is only made when the market, or your portfolio hits a new high in value. The market finally began making money beginning in late June 2013 through 12/26/2014 (a little over 30% in a year and a half). As discussed above, the market then took a respite for almost two years until the election last November. The current bull market started the day before President Trump was elected.

Chart - S&P 500: Money is only made at new highs

Source: AIQ

Bottom line:
The current rally, in the S&P 500 is 1 year and 2 months old. The advance has been very orderly, volatility has been low, and the breadth of the market has remained strong (rising tide lifting most ships.

The market has gone up over 4.2% over the first 9 days of the new year. The extended period of extremely low volatility coupled with a sharp, short term advance, spells out a recipe for one or two-day outliers of 1.5% or more that could happen soon.

Canterbury Investment Management: Tom Hardin

More About Tom Hardin
As Chief Investment Officer, Tom has more than 30 years of experience in the investment management industry and has a broad breadth of knowledge. He is known as an innovator, educator and has been revolutionary in the advancements of portfolio and risk management.

Every effort was used to provide accurate data and mathematical calculations to provide, what we believe to be, accurate results. Canterbury Investment Management, LLC, and its principal owners, make no guarantee of completeness or accuracy of data or calculations as well as conclusions of any statistical data or information contained in the simulation illustrated on this page. Past results or performance is in no way a guarantee of future results.