Stk Mkt 'Going Nowhere" a Prelude to Next Rally Leg

One of the more common skeptical comments I hear is that “stocks have gone nowhere for 18 months (and things are getting worse).” This is a relatively intuitive statement, as Standard & Poor’s 500 index has basically hovered near all-time highs in that period, but it has not managed a breakout, despite a pretty nice gain since start of 2019.

The natural question investors wonder about is whether plateauing/flat stock markets are a sign of a major market top or of a “pause that refreshes.” In my view, the investor consensus generally takes a negative view on flat markets—that it is a bearish signal. Therefore, go the bears, it looks like Mr. Market is “ringing the bell at the top.”

However, the historical facts of the matter around this “nowhere” markets idea suggest the exact opposite. What we see in 2019, a flat market while hovering near all-time highs, is actually uncommon. Since then of WWII, this has only happened three times, which is surprising but it again highlights the rarity. Interestingly, history suggests plateaus are a base, before a strong upward stock move.

In those three previous cases, “markets going nowhere” has resolved to upside in three of three times, or a 1.000 batting average. This supports my 2H19 rally thesis.

Let’s look at the...
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