Three Visuals That Show the Aging Bull Still has Room to Run by D. R. Barton, Jr.

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Three Visuals That Show the Aging Bull
Still has Room to Run

by D. R. Barton, Jr.

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Have you heard lately about how old this bull market is getting? I’ve been hearing about it plenty for quite a while now. A quick Google search shows a plethora of articles on the topic dating back to 2013.

And yet, this market just doesn’t want to go down - at least not for long. In fairness, it hasn’t made much headway in 2015. But the flipside of that coin is that the S&P 500 index has spent almost the whole year within a few percentage points of all-time highs.

Two charts and a data table really caught my attention this week as we contemplate whether this decidedly mature bull market can keep floating to new highs. Let’s take a look at each of these and then draw some conclusions about how to think about longer-term money.

Just How Old Is This Bull Market?

Periodically, Bespoke has been updating the age of our current bull market. So for our first visual, we have a treat for the data junkies out there. (For Van and those other Neuro Linguistic Programming folks — this visual is for the “audio digitals”). Bespoke defines a bull market as a rise of 20% preceded by a peak to trough pullback of 20% (all data on a closing basis). The data set on the right shows bull markets in chronological order form oldest to newest, while the one on the left (framed by blue) shows the bull markets since 1927 ranked by duration.

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We see that the current bull is already the fourth longest of the last 90 years, and within the next couple of months will move into third place. So while the bull has some years on it, it is a long way from being unprecedented in its duration.

Gallup on Finances

Every year, the good folks at Gallup ask a binary poll question about overall finances. This year, here’s part of their analysis from the news release:

“A majority of Americans, 52%, say their financial situation is “getting better,” the highest percentage to say this since 2004. It is also the first time since the recession that this sentiment has reached the majority level.

These data are from a Gallup’s annual Economy and Finance survey, poll conducted April 9-12. The percentage of Americans saying their situation is getting better rose nine percentage points from last year.”

And the accompanying chart:

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In the long run, this will most likely be a contrarian indicator. But if you look at the previous higher level in 2004, you’ll notice that we didn’t hit a market top for another three years. So while we’re at an 11 year high in financial satisfaction, this is a very long term contrarian indicator.

The Troops Are Still Following the Generals

My business partner, Christopher Castroviejo, is a veteran Wall Street insider. One of the sentiment indicators that he got me in the habit of watching many years ago is the cumulative advance-decline line or cumulative breadth. As the header infers, this gives us a useful indicator of whether there is broad-based participation in a move or if there are just a few stocks or sectors pushing the market higher while others lag. Let’s look at a monthly chart showing the cumulative breadth vs. the S&P 500 cash index.

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By this measure, there are not any signs of declining participation. A classic topping pattern would involve a modest pullback in the S&P followed by a push to new highs, with lagging or divergent breadth.

Our bull market is already one of the longest-running of the last 90 years. And with monetary liquidity still pouring in from Europe, Japan and China this bull could have at least one more big push to upside.

Your thoughts and comments are always welcome — please send them to drbarton “at” vantharp.com — I always enjoy hearing from you!

Great Trading,
D. R.

About the Author: A passion for the systematic approach to the markets and lifelong love of teaching and learning have propelled D.R. Barton, Jr. to the top of the investment and trading arena. He is a regularly featured analyst on Fox Business’ Varney & Co. TV show (catch him most Thursdays between 12:30 and 12:45), on Bloomberg Radio Taking Stock and MarketWatch’s Money Life Show. He is also a frequent guest analyst on CNBC’s Closing Bell, WTOP News Radio in Washington, D.C., and has been a guest on China Central Television - America and Canada’s Business News Network. His articles have appeared on SmartMoney.com MarketWatch.com and Financial Advisor magazine. You may contact D.R. at "drbarton" at "vantharp.com".

Three Visuals That Show the Aging Bull Still has Room to Run by D. R. Barton, Jr.

Three Visuals That Show the Aging Bull Still has Room to Run by D. R. Barton, Jr.

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