2/2/17
A bull market is defined by a 20%+ rally that was preceded by a 20%+ decline.
Since 1927 there have been 26 such occurrences, but only nine lasted in excess of a thousand days.
It is truly remarkable that the present bull market has lasted as long as it has without at least one 20% correction. It has been one of the most hated bull markets in history, but it has also been one of the most resilient.
There have already been 5 corrections in excess of 10% and 13 in excess of 5%.
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Tops generally occur in one of two ways:
(1) a prolonged period of distribution that sees major behavioral divergences appearing amongst the major behavioral divergences appearing amongst the major market indices and various internal indicators; or more rarely
(2) a “blow-off” top that sees market indices and individual stocks soar in a near-vertical fashion on a wave of over-enthusiasm.
To date, we see no sign that a bull market-ending top is developing. The major market indices are moving in the same direction and, while market enthusiasm is growing (Barron’s has “DOW 30,000” on its cover), we have yet to see evidence of a buying panic.
