We live in a very complex world, and even I don’t think history repeats itself perfectly. I was curious, though, to see how the market had behaved with respect to time during the prior run-up.
Below I’ve (crudely) drawn a box representing the length of time of the 2002-2007 bull market; it spanned almost precisely five years. I’ve also (again, crudely) drawn a box for the present run-up (which in my opinion bottomed in November 2008, broadly speaking, in spite of the nominal lower on the S&P 500). So we’re kind of “due” around now:
One scary thing for me is the fact that we’re in new record high territory, and with no overhead supply, this tends to lead to a situation that everyone on the financial blogosphere is talking about right now: a melt-up. How long did this situation last the previous time? Just about one year.
So where does that put us right now? What if this melt-up has a one-year lifespan? I’m sorry to say that it means higher highs, more or less, through March 2014.
Indexes don’t always peak together, of course. The one that is of most interest to me right now – - and, who knows, maybe already has peaked – is the Russell 2000. Check out its very long-term trendline in relation to current price levels.