The S&P is Blazing Its Hottest Streak in 4 Years

There are lots of stories circling about stock market volatility -- or lack thereof -- and for good reason. The last time the S&P 500 Index (SPX) dropped 3% or more was June 24, 2016 -- 333 days ago -- during the Brexit panic. The S&P is now in the midst of its longest streak without a 3% pullback since 2013, and just its fourth such stretch in 20 years, according to Schaeffer's Senior Quantitative Analyst Rocky White. Below, we'll take a look at how the index tends to perform after these rare streaks.

Here are the 14 other times the SPX has gone at least 333 days without dropping 3%, going all the way back to 1929. The longest streak ever lasted from June 1962 to August 1972 -- more than a decade.

In fact, once the streak gets to 333 trading days, it tends to last a long time, White pointed out. Consider that:

• 10 out of 14 times the streak lasted at least another year (333 + 252 = 585 trading days)
• Eight of 14 times it lasted another two years
• Four of 14 times it lasted another three years
• Three of 14 times it lasted another four years
• Two of 14 times it lasted another five years
• And once, during the aforementioned streak that started in 1962, it lasted another eight years

As you might expect from those stats above, the S&P tends to outperform after going 333 days without a drop of 3%. While the index averages a one-week decline of 0.08% after these signals -- compared to an anytime average one-week gain of 0.14%, going back to 1943 (the start of the first streak) -- it averages a two-week gain of 1.22%, roughly double its anytime two-week return.

One month after going 333 days without a 3% drop, the index was up 2.88%, on average, and was higher 78.6% of the time. Two months out, the SPX was 4.63% higher, on average, with an impressive win rate of 85.7%. That's compared to an average anytime one- and two-month gain of 1.86% and 3.7%, respectively, with win rates of 63.1% and 66.2%.

So, if history is any indicator, traders might expect the S&P 500 Index to extend its quiet grind to record highs over the next few years. The average eventual streak of the 14 other stretches of at least 333 days without a steep down day is 968 trading sessions, or about four years.