It’s cool to be bearish, and domestic investors are, at least if you count the way they’ve recently been selling down their exposure in US stocks. However, prominent and almost perma-bear Nouriel Roubini was recently quoted as being bullish, which some commentators viewed as a possible sign of the apocalypse. According to Mark Hulbert, writing on Marketwatch, the bull market might have a ways to go.
During the week ending Feb. 3, two weeks ago, 16.4% of the issues on the NYSE hit a new 52-week high — which represents the highest level this percentage has reached over the last six months. Last week, this percentage contracted to 11.7%, even as the Dow Jones Industrial Average was itself hitting a new 52-week high.
That is the contraction that has some commentators worried.
But now consider what Ned Davis Research found upon trying to correlate the weekly new-high data with bull market peaks. They found that there typically is a long lag time between when the percentage of stocks hitting new weekly highs reaches its peak and when the bull market finally tops out.
In fact, the firm found that in no case over the last five decades did a bull market top out before a peak was reached in the percentage of weekly new highs. And, furthermore, the average lag time between a peak in that percentage and the bull market’s top was more than 33 weeks — nearly eight months.
So even if the percentage of NYSE stocks hitting weekly new highs peaked out at 16.4% earlier this month, the historical data would not warrant an immediate concern that the market was about to keel over dead.
I don’t know what the future holds. Unlike Nouriel Roubini, I’m not crazy enough to make a forecast. But I think it’s interesting that so many are concerned about the market right now, in the face of historical data that suggests we might be quite a way from the end of the run.
