The Unstoppable US Equity Rally In Perspective

Tyler Durden's picture

'The current rally is running long; equities are due for a 3-5% pull-back' is how Deutsche Bank begins to give some context to the scale of the performance of stocks over the last four months. Whether it be liquidity-fueled optimism, optically-pleasing macro data, crisis-fatigue, or just good old-fashioned back-up-the-truck-we're-all-in buying since the last 10% correction in November, the S&P 500 has rallied 22% - essentially unimpeded for 80 days without a drawdown. In between 5% selloffs, the median rise in the S&P 500 is 10% and the duration is 56 days so this current rally is indeed getting long in the tooth (with a 2.5% retracement the best the bears have managed in 2012). To get a better sense of how equities may perform after such a big rally, Deutsche identifies 8 similar cases to the current one when a 10%+ drawdown was followed by a 15%+ recovery: Jul-50, May-70, Dec-74, Aug-98, Sep-01, Oct-02, Feb-03 and Mar-09. At the same point in the rally (i.e. after 3mo), the market continued to grind higher the next 3 months by 4% on average. So a move of this size and velocity (and smoothness) has only occurred 7 times in the history of the S&P 500 and a quick glance at some of those dates marks some notable periods in US economics (and global geopolitics).

Trough to Peak Returns between Two 5% Drawdowns - we are starting to get in to the best ones ever...

Number of trading days between Two 5% Drawdowns...

And the S&P 500 has only risen by more than this on six other occasions after a 10% drawdown...

and many of those were during some of the most crisis prone periods this nation has ever experienced.


Charts: Deutsche Bank

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-1Delta's picture

and VXV 3M vol hit lowest since 07 since everything is apparently fixed. Credit disagrees

ZeroPower's picture

Vol futures curve shifted some today. Nice to finally see a pickup in front months as well.

SMG's picture

Obviously Bullish now that we live in Bizzaro World. 

Chartist's picture

I don't care, there's no 3-5% pullback coming near term....The Fed wants you in...Bernanke has to help the defined benefit plans earn their 8% promised annual return...

withnmeans's picture

Sure the FED wants everybody all-in.... That's is their motive, to get every last dime out off everyone, THEN PUT THE SCREWS TO YOU!!!

Zero Govt's picture

talking of screws (coming loose) have you seen the Fed balance sheet which they've awarded themselves 'Mark to Unicorn' ?

Much like the falling apart at the seems ECB's balance sheet, all big Western banks balance sheets and of course all Western Govts balance sheets

they're all going DOWN

they figure if they pull us down the sewer with them, they don't look so bad

its called 'democratic Government' apparently

maxw3st's picture

But, but, but, how will the Euro continue to run up in the face of 3 trillion in QE if the Algos can't keep it tied to the S&P's rise?

Ras Bongo's picture



While we wait for your Friday Humor, here is this in the meantime

YesWeKahn's picture

man can't live without sex just like the market can't survive without Bernanke.

ebworthen's picture

And the rise in equities only cost $10 Trillion of unearned future taxpayers fiat debt lube. 


TradingJoe's picture

Friday window dressing wil be over, the "rally" too!

devo's picture

Earnings season will end the party.


Zero Govt's picture

what party?

Ben is running the biggest help group of debt-riddled gambling junkies in human history

this is epic colonic irrigation

Jake88's picture

Are you sure? Earnings should be down. But does it really matter anymore?

T-roll's picture

Everyone is expecting poor earnings for Q2. This is already "priced in". This train won't stop until Bennie wants it to.

YesWeKahn's picture

Bernank, Bernak and Bernank replaced USA, USA and USA.

Pumpkin's picture

If I had $10 trillion, I would make the market do what ever I wanted.

fonzannoon's picture

If anyone wants a tremendous laugh go to and look at the article about how gold prices have topped out. Yup it's the main article of course. More importantly look at the chart.

devo's picture

That is so kind of them to provide free, objective financial advice.

edit: they have gold going to 0 (ha ha). On a long enough time line?

PSS. If Apple or the dollar dropped .71%, would we be hearing that they're bad investments? Always do the opposite of what they want you to do, and for obvious reasons, they don't want citizens owning gold.

lasvegaspersona's picture


funny...they are quoting Jeff  "1:100 metal to paper" Christian 

I believe that the 'commodity' price of gold may have topped out years ago...what we are seeing now is more anticipatory of the metal as a wealth we have reached the highest price folks will pay for a wedding band...big deal... we shall see 'somewhat' higher prices as the people buy a substance that preserves purchasing power (and maybe so much more!)

Lady Heather...UNCLE's picture

...this time it's different...really

PersonalResponsibility's picture

I see your /sarc.  Care to explain why this time it might not be different?

Eric L. Prentis's picture

My economic model, which is based on long-term trends in the stock market, predicts the US will slip back into recession in April/May 2012.

sun tzu's picture

More likely in the summer when gas prices hit $5. Most people won't have a dime left for discretionary spending as energy and food prices skyrocket.

francis_the_wonder_hamster's picture

" Most people won't have a dime left for discretionary spending as energy and food prices skyrocket."

On average, I fill up once a week.  It costs me $60 at $4/gallon (although I pay more right now).  That's $240/month on gas.  A rise to $5/gallon only costs me $60.  That's a bar tab, and won't change most people's discretionary spending.

chump666's picture

Some huge AUD selling on Asian open.  Maybe, just maybe if we see a crash in the AUD/bonds, could set off a equity collapse in Asia follow on to US/EZ markets.  Yes, like 1987.

Something nasty is brewing, very nasty. 

We wait.

ekm's picture

Let's wait, but it's going to be very long wait that will give a huge return.

The news today that the Fed accepted they had bought european paper is quite, quite significant.

optionmillionaires's picture

Throw it at a board long enough, your bound to hit it...


SINA going up :




Short us please ~

chump666's picture

Eye bleeding overbought.  You'll panic soon.  Then we wipe you out.  Simple.

gatorengineer's picture

Everything else beats consensus by 3 sigma, why would the rally do anything else.......  Ben can print longer than I can stay rational....

Bansters-in-my- feces's picture

Ponzi world,about covers it.

ghostfaceinvestah's picture

They are looking at the wrong benchmark, a better bogey is the Zimbabwe stock market.

q99x2's picture

Let's see:

IF, The Fed controls whether the market goes up or down.

And, The Fed is GS, Rotheschild's, Bushs, Rockefellers an so on.

And, The Fed can lure money into the market.

Then, Expect the market to correct and sweep more wealth into the Banksters pockets and then rebound.

Does it get any easier?

Yes it does because the elite have no need to do anything because they have the right to conterfeit money.

So who knows.

Snakeeyes's picture

And home builder stocks are rocking too.

All an illusion thanks to the Fed.

disabledvet's picture

truly extraordinary...and right to report it. "we have been here before" the 90's. We don't have the truly bubble like "ether" of "burn rates" like then. "this is real money" contrary to popular ethos. Still "those are trillion dollar deficits." The market in the 90's paid us into surplus. That will not be true this time around. We must have a blow up...and i believe it will happen in the debt market...though not in Treasuries which truly do seem to be an "unpop-able bubble." (which means other bubbles are the result.) given the size of the collapse "this is news" as they say.

ekm's picture

This is not a rally, since this not a market.

Just few hands that own most of the market are scared shit of seeing their holdings fall in value and keep buying, less and less in volume, but buying they do keep. Until MFGlobalization occurs again. They kept buying italian bonds in margin in order to prevent their value falling and finally got the margin call from JPM.

There is only one question: Who will get the margin call next? When - God knows. But ...someone will get a margin call, ooooh they will, particularly the one that is stuffed with BAC shares.

PersonalResponsibility's picture

Then they'll get bailed out.

devo's picture

Futures are up again. Yay?

ekm's picture

Chump666 told me something last night that is still in my mind.

He understood the PPT kept the stock bid, but why would they keep the crude oil bid? That could explain a lot of things. That guy is quite detail oriented. Quite bright.

mess nonster's picture

When teaching a dog to ride a bicycle, training wheels aren't enough. One has to steady the bike by hand for a long long time. Finally, after years of holding the bike upright, even the trainer begins to think the dog might have gotten the hang of it by now. But the dog and the bike will topple, the minute they are left to their own devices.

tbone654's picture

it's been since 12/12 since there was even a 3% reaction...  anytime it reacts towards 3% it bounces high...

read the tape... the buyers are higher  

PersonalResponsibility's picture

the S&P 500 has rallied 22% - essentially unimpeded for 80 days without a drawdown

Maybe because it's different now and the fed is doing all of the buying either directly or indirectly?

a move of this size and velocity (and smoothness) has only occurred 7 times in the history of the S&P 500

Maybe because it's different now and the fed is doing all of the buying either directly or indirectly smoothing things out?

Come on, "The Unstoppable US Equity Rally In Perspective"

We get it.  It is unstopable until it isn't.  But it never will end unless it is the end; and, in that case, you may as well have enjoyed the ride.