Photographer: Michael Nagle/Bloomberg

S&P 500 Surges for a Fourth Week

  • S&P posts longest streak of trading within 5% from record high
  • Relative strength index is near the highest level in history

Waiting for an entry point in the stock market just isn’t working. The latest proof: amid the best start to a year ever measured in global equities, the S&P 500 has now spent longer trading within 5 percent of its all time high than ever before.

Add it to the list of superlatives piling up in a market that has now done in a month what Wall Street thought would take a year. Rising 2.2 percent over the last five days, the benchmark sits at 2,872.87 -- higher than the average target of strategists tracked by Bloomberg as recently as December.

Twenty-six days in and equities have yet to notch a down week. They’ve risen more than 7 percent and posted more up sessions -- 14 -- than any January since 1989. At these levels, stocks are nearing the most overbought point ever, making it hard for even the most bullish analysts to keep up.

For the week, the S&P 500 rose 63 points. The Dow Jones Industrial Average added 545 to 26,616.71. The Nasdaq Composite Index climbed 2.3 percent to 7,505.77, bringing its year-to-date advance to 8.7 percent. The MSCI All-Country World Index increased 2.1 percent to 550.32, extending its 2018 gain to 7.3 percent to leave it on track for its largest January rally ever.

For money managers, finding a reason to sell is getting harder, especially when a strategy that simply buys shares that are already rising the fastest is doing better than any time in eight years.

“The herd is running into the market at the moment, and that’s giving the market some additional legs,” said Matt Schreiber, president and chief investment strategist at WBI Investments. “People are in tune with the fact risk could be around the corner. But at the same time, too, they’re still moving money into equities.”

The S&P 500 rose 2.2 percent in the five days through Friday. After 18 trading sessions, the gauge now sits 1.2 percent above the 2,838 year-end average estimate made by 17 Wall Street analysts at the end of 2017.

One indicator after another shows the rally’s strength. The S&P 500 has traded within 5 percent of its record high for 399 days, data by Charlie Bilello, director of research at Pension Partners LLC, show. On Monday the streak broke the previous record of 394 days of the S&P 500 trading within 5 percent of an-all time high, which happened between December 1994 and July 1996.

Unsurprisingly, concern over whether the rally is too hot are getting more and more pronounced. A 1.2 percent gain in the S&P 500 on Friday, the biggest gain in almost 11 months, pushed its 14-day relative strength index to 86.69. The measure was higher just two times in data going back to 1954, Bloomberg calculations show. Approaching $2 trillion, the amount of value added to equities in January is poised to exceed any month on record, data compiled by Bloomberg show.

“The previously pessimistic have changed stripes and are now optimistic about the equity markets and that has been the big pile on which has been the fuel for equity market gains,” said Brent Schutte, chief investment strategist of Northwestern Mutual Life Insurance Co.’s wealth-management unit. “We have less converts to equity markets in the future and so that makes me a little bit less optimistic about equity returns in the coming year.”

— With assistance by Sophie Caronello

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