Where Has Market Been & Where Is It Going (by Ryan Mallory)

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We're on week 6 of a most impressive market rally, with yet even the slightest of market pullbacks. So what can one expect really, in the weeks ahead. First, let's take a look at market rallies dating back to 1963, nearly 50 years of market data using weekly chart data, to find out what rallies, on a consecutive positive week basis, were greater than what we are currently seeing.

  • January 1998 through February 1998 – 8 consecutive weeks
  • May 1997 through June 1997 – 8 consecutive weeks
  • July 1989 through September 1989 – 9 consecutive weeks
  • September 1986 through November 1986 – 8 consecutive weeks
  • October 1985 through December 1985 – 12 consecutive weeks
  • December 1975 through January 1976 – 8 consecutive weeks
  • January 1972 through March 1972 – 8 consecutive weeks *
  • December 1970 through February 1971 – 8 consecutive weeks
  • November 1963 through January 1964 – 9 consecutive weeks **
  • July 1963 through September 1963 – 9 consecutive weeks

* Combined with the previous market action proceeding a negative doji candle, the market actually rallied from November 1971 – through March 1972 for 15 out of 16 weeks.

** After a slight negative doji candle, the market went on to rally another 6 weeks for a total of 15 out of 16 weeks until March 1964

In actuality, the news is favorable for the market, when considering how many times we've had rallies that extended beyond seven weeks. The downside is, that we haven't seen such a rally beyond 7 straight weeks since 1998 (13 years), and typical rallies tend to stop at 8 weeks. But often times, these rallies were a part of a much bigger rally, which means there was a cooling period, a small pullback, and then a new leg up in a much larger rally. 

Whether we see a rally that extends in to historical proportions is anyone's guess. But what I see as being likely here, is a brief cooling period, with a slight negative bias, that leads to another move higher in the market.

So while I don't discount the fact that we could continue rallying in the coming 2-3 weeks, I think the best scenario, and we are seeing it play out some here this week, is to have a slight pullback in the market, which could better suit the market for that next wave of buying in the coming weeks.

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