BULL MARKET IN STOCKS REACHES ITS TENTH ANNIVERSARY TODAY -- AND IS THE LONGEST IN HISTORY -- THE ECONOMIC EXPANSION WILL HIT ITS TENTH ANNIVERSARY IN JUNE -- AND IS NEARING A NEW RECORD AS WELL

HAPPY TENTH ANNIVERSARY... Today marks the tenth anniversary of the bull market in stocks that started on March 9, 2009. It's already the longest in history, and the first bull market to last ten years. According to the Wall Street Journal, the S&P 500 has gained 300% over those ten years which makes it the third strongest bull market in history. The strongest was a 400% gain between October 1990 and March 2000. The current economic expansion began in June 2009. It has now lasted 117 months and is three months away from matching the longest previous expansion in history of 120 months which lasted from 1991 to 2001. A recent WSJ article by Alan Blinder points out that only two economic expansions since 1854 have lasted longer than 100 months. And none have lasted more than 120 months. If the current expansion lasts into July, it will be the longest in history. They say bull markets and economic expansions don't die of old age. But old age usually brings most things closer to the end.

History shows that stocks usually peak and trough ahead of the economy. The October 2007 stock market peak preceded the December economic peak by two months. The March 2009 stock upturn led the June economic upturn by three months. Those lead times were relatively short. The bull market that ended in March 2000 preceded an economic downturn by a year. That lead time was unusually long. Historically, stocks usually peak from six to nine months ahead of the economy. Which is why we look for possible stock market peaks to alert us to potential peaks in the economy that usually follow. And we may be looking at one.

The weekly bars in Chart 1 shows the S&P 500 hitting a new record high last September before tumbling nearly -20% during the fourth quarter. The first quarter rebound has taken the SPX back to its November high where the rally has stalled. If stocks weaken from here, that would leave us with a pattern of "lower peaks" and "lower troughs" which raises the possibility that the stock market peak has already been seen. In addition, the 14-week RSI line (upper box) peaked at the start of 2018 and has been declining since then. That suggests that the ten-year bull market may be losing momentum. Monthly momentum indicators are also weakening.

Chart 1

LONG-TERM MOMENTUM IS ALSO WEAKENING... The monthly bars in Chart 2 show the uptrend in the S&P 500 that started exactly ten years ago. And that uptrend is still intact. The sharp selloff that took place during the fourth quarter of 2018 stayed above the rising trendline drawn under its 2009, 2011, 2016 lows. That's the good news. What may not be so good are signs that long-term momentum indicators are starting to weaken. The two lines in the upper box in Chart 2 plot the monthly Percent Price Oscillator (PPO). [The PPO is a variation of MACD and measures percentage changes between two moving averages]. The PPO lines turned negative during the second half of last year when the faster red line fell below the slower blue line. And they remain negative. [The red histogram bars plotting the difference between the two PPO lines also remain in negative territory below their zero line (red circle)]. Secondly, and maybe more importantly, the 2018 peak in PPO is lower than the earlier peak formed at the end of 2014. That's the first time that's happened since the bull market began. In technical terms, that creates a potential "negative divergence" between the PPO lines and the S&P 500 which hit a new high last September. That raises the possibility that the ten-year bull market may have peaked in the fourth quarter and is now going through a major topping process. If the bull market in stocks is nearing an end, that could start the clock ticking on the nearly ten-year expansion in the U.S. economy. That might not prevent it from setting a new record for longevity this July, but it might diminish its chances for celebrating an eleventh anniversary in the summer of 2020.

Chart 2