Wednesday marked the seventh anniversary of the current bull market, which started on March 9, 2009 with a closing low of 6,547 on the Dow Jones Industrial Average. (The previous session, on March 6, actually registered a intraday low of 6,469.95.)
Since then, thanks to aggressive monetary policy stimulus from the Federal Reserve, fiscal stimulus from the U.S. government, the bailout of the Detroit automakers and more, the Dow is now flirting with the 17,000 level for a gain of nearly 160%. The high of 18,351 hit last May was worth a gain of more than 180 percent.
All of this was enough to put investors in a celebratory mood. In the end, the Dow Jones Industrial Average gained 0.2%, the S&P 500 added 0.5%, the Nasdaq Composite put on 0.6% and the Russell 2000 ended Wednesday 0.5% higher. Treasury bonds weakened, the dollar finished mixed, gold lost 0.9% and crude oil gained 4.8% to close at $38.24 a barrel.
Overall, it was a quiet session as investors look ahead to Thursday’s European Central Bank policy announcement. Expectations are very high for a range of additional monetary policy stimulus measures including further interest rate cuts into negative territory and an expansion of its bond buying program. Other measures could include a reintroduction of targeted long-term bank loans to ease profitability concerns for Eurozone institutions.
Oil resumed its rally to push to levels not seen since December thanks to a smaller-than-expected EIA inventory build. Moreover, gasoline stockpiles fell 4.5 million barrels in what was the largest decline in nearly two years. That boosted the ProShares Ultra Oil (NYSEARCA:UCO) recommended to Edge subscribers to a gain of 18% since recommended on March 4.
As a result, energy stocks led the way higher with a 1.5% gain followed by technology, which gained 1%. Olive Garden operator Darden Restaurants, Inc. (NYSE:DRI) rose 3.6% after pre-announcing same-store sales growth of 4% vs. the 2.7% analysts had penciled in.
While stocks have skidded sideways since 2014, refusing to hit new highs since last year, let’s not discount what’s been achieved over the last seven years. The bull market has lasted 2,556 days already, the fourth longest uptrend since 1900 eclipsed only by the roaring uptrend of the 1920s, the post-WWII uptrend that started in 1947 and the dot-com, go-go years of the 1990s. And in percentage gain terms, it’s the market’s fifth best performance.
But it has been 294 calendar days since the Dow closed at a new high. According to Jeff Hirsch of Almanac Trader, “the longer it takes to reach a new high, then the higher the odds are that the bull [market] has already ended.”
Will the bull market live to see its eighth birthday?
This question is made all the more important since, by at least one definition, the bull market could actually already be dead. That’s the takeaway from the folks at Ned Davis Research, who flagged a new bear market in the Dow on Feb. 11 after closing below its August 2015 low for a peak-to-trough decline of greater than 13% after 145 trading days.
The more common definition of a new bear market is a 20% decline from a high. From the November high of 17,997 to the January low of 15,450, the Dow suffered a total decline of 14.1%. Not enough. Thus, the bull market lives on.
The small-cap stocks in the Russell 2000 fared worse, losing 21.7% between early December and the middle of February. Technically, a new bear market. Since then, the index has rallied back to its early January levels. Unless new highs are set soon, the impression will be that the smallest, most sensitive stocks in the market are in fact in a new long-term downtrend.
The bulls need to hurry up and push to new highs to avoid the impression they are losing control.
For this to happen, we need to see progress on a number of catalysts that have been weighing on sentiment: Fear the Federal Reserve is tightening policy too fast, worries over stalled corporate earnings growth, the drag from low energy and commodities prices, and concerns over the economic health of China, Japan and the Eurozone.
The Fed’s next policy decision on March 16 will play an important role in this. Best case scenario would be a reduction of expected interest rate hikes in 2016, bringing policymakers into alignment with current futures market pricing indicating only a single rate hike this year.
Anthony Mirhaydari is founder of the Edge and Edge Pro investment advisory newsletters. A two-week and four-week free trial offer has been extended to InvestorPlace readers.
