Online Trading Academy Article of the Week

by Russ Allen, Online Trading Academy Instructor

As I write this article, the Standard & Poor’s 500 Index has closed at an all-time high of 2023.57. The stock market has been in a bull market for several years now, and the question is, “How high is up?” This situation seemed so familiar to me that I checked previous articles, to look at what I had written before. The current situation is so strikingly similar to what was happening in May of 2013, that I’m re-posting a whole article from that time below for our reference.

The following was written in May, 2013:

“As I’m writing this on May 15, 2013, the U.S. equity indexes are making all-time highs, for the ninth time in the last ten sessions. Most everyone who owns stocks today has a profit, and everyone who doesn’t own them wishes they did. It seems that the market can’t do anything but go up, up, up.

“Even bad news is good news, because it means the Federal Reserve won’t have to turn off the stimulus. Manufacturing down? Unemployment claims up? Retail sales flat? Hurray! The Fed will make sure that the good times keep rolling.

“And so they will, for some time, anyway. How much time? There’s no way to know. Once a bull market gets real momentum going, it can carry on far longer and far higher than logic and good sense would indicate. This bull market is entering its fifth year. In the past, bull markets have lasted anywhere from 4 to 29 years; while major bear markets have taken anywhere from 3 to 15 years, as shown in this chart from dShort.com:”

“Note that in the table above, the figures for Percent change and for Returns are inflation-adjusted. That’s why the percent change from the 2009 low to “now” (April 1, 2013) in the last row shows only a percent change of 89%, vs the nominal gain of over 100%.”

[Note November 5, 2014: As of now, the last row values would be Percent Change = 156% (inflation-adjusted) and Number of Years = 5.7]