It finally happened. This past week, the stock market officially entered a new technical bull market. And history suggests that means a pretty big stock boom could be on the way.
By definition, a bear market begins when stocks drop 20% from recent highs. And conversely, a bull market begins when stocks rise 20% from recent lows.
On Thursday, June 8, the S&P 500 closed more than 20% above its October lows.
Sure, that may feel arbitrary. Stocks rallied 20% of their lows; so what?
Well, history suggests that a 20% rally off recent lows is strongly suggestive of an incoming stock market boom.
The Data Indicates a New Bull Market Is Here
Since 1949, the S&P 500 has entered a new technical bull market just 13 separate times. On 12 of those occasions, the new bull market was legit. Stocks kept rallying over the next year, for an average return of over 20%.
Only once – in late 2001 – was the new technical bull market a “headfake.”
But that 2001 rally looked a lot different from the rally we’re seeing now. It was fast and furious. Stocks soared about 21% over 105 days. By contrast, the current rally has been slow and steady. Stocks have soared about the same amount (up 21%), but they’ve done so over 233 days (more than twice as long).
You know the old saying, ‘slow and steady wins the race’? That is certainly the case with bear-market rallies.
Fast-and-furious bear-market rallies tend to fail. But slow-and-steady bear-market rallies tend to indicate a major boom is coming.
Slow and Steady Wins the Race
Below, I’ve graphed the start of every new technical bull market since the Great Depression by the rally’s size and length. As you can see, there have been a ton of fast-and-furious new technical bull markets where the rallies died after less than 200 days.
But once a rally goes on for more than 200 days, chances are high that you’re looking at the start of a multi-year bull market.
Over the past 100 years, there have been 26 technical new bull markets. More than half of them – 14 – failed before their 200th day.
But of the remaining 12 that lasted more than 200 days, more than half – 9, to be exact – lasted more than three years.
We’ve crossed that all-important “200-day threshold” in this bear-market rally.
And that’s why it likely isn’t a bear-market rally at all.
Rather, the longer this rally goes on, the more it looks like the start of a huge, new multi-year bull market.
The Final Word
It’s time to prep your portfolio for a potential years-long melt-up in stocks, especially with a big catalyst coming this week.
That’s why we recently compiled a portfolio of the top AI stocks to buy today. We think stocks are about to soar, and we think AI stocks will lead that rally. We want you to own the best AI stocks in the market to capitalize on this boom.
As part of this portfolio’s debut, we’re showing a special presentation in which I actually demonstrate the real-world power of AI.
But reader beware: This presentation may be mind-blowing. And these stocks could produce mind-blowingly huge profits, too.
On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article.
