The Dow Jones Industrial Average has just taken out its February 18 high and is now trading at a new bull market high. The S&P 500 is up nicely as well today, but it has about 8 points to go before it too trades at a new bull market high. If the S&P does break to a new high, where do things go from there?
There are two pullbacks during the current bull market that we believe look the most similar to the most recent one. The first came in June/July 2009 and the second came in January/February/March 2010. The June/July 2009 pullback saw the S&P decline 7%, and it took 38 days for the index to recover and break to a new bull market high. The January/February/March 2010 pullback saw the S&P decline 8.1%, and it took 55 days for the index to break to a new bull market high.
As shown in the chart of the S&P 500 below, once the index did break out to a new bull market high following the two corrections just mentioned, it went on to trade quite a bit higher in the days and weeks following.
[Click to enlarge]