The SPX just set off a signal sounded only once since 1998
The major market indexes have been assailing record highs in recent sessions, even as the number of individual U.S.
stocks hitting new highs is relatively weak. The
Dow Jones Industrial Average (DJIA) is on pace for a fifth straight record close, while the
S&P 500 Index (SPX) and
Nasdaq Composite (COMP) just sent up signals not seen since 2013 and 1999, respectively, largely thanks to a rally in
tech stocks. Below, we'll break down the recent winning stretches for the Dow, S&P, and Nasdaq, as well as how the indexes have moved following previous signals of this magnitude.
Dow Seeks Fifth Straight Record Close
According to Schaeffer's Senior Quantitative Analyst Rocky White, the last time the Dow marched to a record close five sessions in a row was mid-December. On average, the Dow gained 0.56% two weeks after a signal, and was positive a whopping 71.8% of the time. Going three months out, the Dow averages a gain of 2.49%, and was higher 68.4% of the time. That's a much better performance compared to the Dow's anytime returns since 1954.
S&P Eyes Signal Sounded Just Once Since 1998
The S&P 500 Index is aiming for its seventh straight gain, and just touched another record high. The last time the index marked both of these feats simultaneously was July 2013, and before that you'd have to go back to November 1998.
After previous signals, the SPX went on to average a one-week return of 0.62%, and was higher 79.3% of the time. That's much better than the index's average one-week return of 0.17%, going back to 1950. Of course, next week is Presidents Day, however, which tends to bode poorly for the broad-market barometer. Looking three months out, the SPX averaged a return of 2.26%, and was higher 69% of the time -- a slightly better-than-usual performance.
Nasdaq Signal Flashes For First Time Since Tech Boom
The Nasdaq Composite logged its seventh straight record high today, marking a feat not accomplished since December 1999. Following previous signals, the COMP has averaged roughly in-line returns going a month out. However, while the Nasdaq has been higher just 50% of the time three months after a signal, it's averaged a healthy return of 3.27% -- slightly better than its anytime three-month return going back to 1979.
Finally, the Dow, SPX, and COMP haven't simultaneously notched record highs for five straight sessions
since the early 1990s, according to
MarketWatch. However, while we recommend not disturbing bullish positions, the massive short covering of late could point to a lack of fuel in the tank, as Schaeffer's Senior V.P. of Research Todd Salamone recently noted in
Monday Morning Outlook. Against this backdrop, traders should consider the purchase of short-term in-the-money call options as a "
stock replacement" strategy, allowing you to participate in a continued trend higher, while at the same time decreasing your dollars at risk.
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