According to technical analyst
and chief market technician at MKM Partners Jonathan Krinsky, you should drop any hopes for new highs in the stock market this year.
He makes such a conclusion after looking at how the S&P 500 has behaved historically after falling at least 10% from a peak.
The 10% slide is often described as a
“correction,” and the S&P recorded one last month as the benchmark tumbled more than 10% below its May record close.
Krinsky said in a note "Don't Expect New Highs This Year" that there have been at least 24 times when the gauge passed through at least 10% correction for the first time in at least three months.
“On average, it took nearly 12 months to reach a new 52-week high, while the median recovery time was over eight months. All of this suggests that while a low may have already been created, making new highs this year would be unusual from a historical standpoint.”
Krinsky also says that “even if we are in a bottoming process, the odds of the SPX making a new high this year are less than 25% based on historical precedence.”
The analyst notes that his organization is aware that the
consensus view is “we are in a bottoming process, and the bull market is
still very much intact,” but the reality is that nobody knows for sure.
Below is a table from MKM’s Krinsky demonstrating the number of days that it is taken the S&P score a new high after a 10% correction. His data go back to the 1960s.