Remain bullish and be prepared to be quick.
U.S. equity markets’ current rally is reaching historic levels. Presently, we remain bullish given that we follow a discipline based on quantitative and technical measures. While the bull market may be starting to get long in the tooth, the final phase may produce strong gains that we want to capture. Furthermore, we believe our method of identifying stock market distribution and technical failure will allow us to exit positions before pullbacks from the peak are too great. As of November 3, the S&P 500 has only one distribution day and the NASDAQ has only three. Generally, if the major U.S. indices were to experience distribution day counts greater than seven, especially if this occurred over a period of 25 trading days or fewer, then we would likely become more cautious. It is important to remember that distribution can occur in a rising market if money flows are to the downside. However, for now, investors should stay positively inclined and invested.
Slow and Steady Wins the Race
In terms of performance, the current bull market (defining -25% from highs as the end of a bull market) is the fifth-best on record since 1903, rising 263%. This gain has occurred over 451 weeks, the third-longest stretch ever. This is atypical versus the average bull market length of 199 weeks and is now the longest rally since 1900 without a 5% correction in the DJIA.
