How Far Can a Strong Market Continue to Climb?

"An object in motion tends to remain in motion until acted on by an outside force." - Simplified version of Newton's First Law

My Grandma Seymour was a gracious woman.

A godly woman. A woman of exceptional beauty (often mistaken as my mom's sister - much to Mom's chagrin...).

She was the quintessential Southern matriarch.

She ruled our family, not so much from a position of authority (though she had that), but rather from a position of repeated wisdom and gentleness.

When I grow up, I want to be just like her.

When anyone stayed at Grandma's house, they were awakened to an essential Southern breakfast feast.

Scrambled eggs. Southern biscuits and sausage gravy (or red-eye gravy, if you preferred). At least three varieties of homemade jellies and jam. Homemade apple butter. Sausage patties. Tomatoes. Always tomatoes. And then - the star of the show - country ham.

If you don't know country ham, you're missing out on one of life's delicacies. It may be my son's single favorite food. It's a salt and sugar-cured ham - a close cousin of prosciutto, though cut more thickly.

Here's the reason I'm telling you about this extravaganza - this was the layout at every breakfast I had at Grandma's house - ever. Even if it was just the two of us.

As I grew older and would go to see her by myself, I could have expected something different - something less expansive. But it wouldn't matter what I expected. I got the whole feast.

If you stayed the night with Grandma - even when she was a spry 95 years young - you got the full breakfast. Period. Why expect anything else?

But what does this have to do with the current U.S. markets or our journey together here at The 10-Minute Millionaire?

A lot, actually.

The markets are grinding up mercilessly.

And markets in a slow grind up typically stay in a slow grind up for longer than people expect.

Like wondering what's for breakfast at my grandma's house - why expect anything different?

Yet tons of people keep expecting the markets to go down.

Some are even calling for a crash.

I've got another take.

Let's look at it together...

Markets Will Do What They Want, but I Expect Them to Act Like They Usually Act

Let's start with a premise that markets don't flop from the top.

Said in a less kitschy way: Markets tend to make rounded tops before their biggest drops.

Let's look at three examples that most everyone will remember.

First the dot-com bubble:

SPX

Next, we had the real estate and debt bubble in 2007-08:

SPX-2

And lastly, we had the summer of 2011, when Standard & Poor's downgraded U.S. credit in the midst of the European debt crisis:

SPX-3

Today's U.S. markets are just pounding out one incremental new all-time high after another.

This is the second-longest bull market in the history of U.S. equities markets. Turning that statistic into a strategy and trying to exit too quickly could be a costly mistake.

And one we won't make here at the 10-Minute Millionaire.

We have made many new highs this year.

But that doesn't mean we can't make more.

Let's look at an interesting set of charts from LPL Financial Research.

[mmpazkzone name="in-story" network="9794" site="307044" id="137008" type="4"]

We'll start with one that shows how many new all-time highs the S&P 500 has made each year:

New-Highs

From that LPL report, Senior Market Strategist Ryan Detrick had this to say:

"It is important to remember that new highs tend to happen in clusters that can last decades, but in between, you can have years without new highs. Recalling this can be one clue that this bull market may not be as old as many think."

The Dow has been tracked even longer, back to the 19th century. And while this year's 48 new all-time closing highs is a big number, that is only the eighth-highest single-year total!

Here's the data:

Dow-New-Highs

Lastly, the Nasdaq 100, which has made 60 new highs, is close to its record of 66 in a single year (it's a much younger index).

But the key that I take away from the next chart is how long the string of new highs persisted:

Nasdaq-New-Highs

During that 1985-2000 run up, new highs were made in 15 out of 16 years.

Let's get to the bottom line.

Far be it for me to give any absolutes. But for people trying to decide what to do with money right now - why fight against a market that's actively trying to hand you money on the long side?

Many pundits and even some traders and investors I know and respect have been actively calling for a top.

For years, now.

I, too, expect a pullback after the strong run we've had since the middle of September.

But I expect that pullback to be modest, after which this grinding bull will resume.

For the first time, D.R. Barton's sharing the secret that made him a self-made millionaire. His 10-minute, three-step system empowers investors to double or triple their money without being tied to a trading screen. And the best part is, it's absolutely free. So click here to get his 10-Minute Millionaire every week, and get started on the path to your first million.

And I'm not about to waste my mental RAM trying to pick a top when there is none to be seen.

I find it much easier to swim with this slowly rising tide. Peter Lynch famously said, "Far more money has been lost by investors preparing for corrections, or trying to anticipate corrections, than has been lost in corrections themselves."

Staying on the right side of the market is not always easy.

But when it is, keep riding the easy move up while having a plan in place to protect your capital when the inevitable big pullback comes.

Just don't pull that ripcord until an actual drop starts happening...

Up Next: Potential $50,000 Payday Lined Up

Today, one of America's top trading experts, a self-made millionaire who has already shown readers an incredible 33 triple-digit windfall opportunities this year alone, is making a big announcement.

His Hook Pattern strategy has been giving folks a chance to make large cash windfalls – $4,598, $8,000, $3,800, $6,100 – usually on just one or two trades. And now he's spotted two extraordinary "Hooks" that are about to soar.

He wants to show you how easy it is to begin collecting thousands of dollars a month. Details here.

The post How Far Can a Strong Market Continue to Climb? appeared first on 10-Minute Millionaire.

About the Author

D.R. Barton, Jr., Technical Trading Specialist for Money Map Press, is a world-renowned authority on technical trading with 25 years of experience. He spent the first part of his career as a chemical engineer with DuPont. During this time, he researched and developed the trading secrets that led to his first successful research service. Thanks to the wealth he was able to create for himself and his followers, D.R. retired early to pursue his passion for investing and showing fellow investors how to build toward financial freedom.

Read full bio