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S&P 500 - An ATH in July, What's Next?

The S&P500 closed today at 2,459.27, an all-time high daily and weekly close.  The primary trend is up across any and all time frames. A Bull Market was born in March of 2016, confirmed in July of 2016, and remains alive and well as the market continues to "climb the wall of worry".

Today's advance to fresh all-time highs triggers a few quantitative setups that are worth noting.  First, July's now cleared its "inside month", that is its high is now greater than June's high. Since 1980, there's 143 calendar months that reached an all-time high during the month. Exactly 12 of them went on to also trade below the prior month's low and close the month in the red.  That marks just a 8.39% historical occurrence rate.  If we focus on the month of July alone, we can identify 15 prior July's that traded up to an all-time high.  Exactly 3 of them went on to also trade below the prior months low and close the month in the red.  That's a 20% historical occurrence rate.  With June's low at 2,405.70, history would suggest its unlikely we face a meaningful reversal over the coming 11 trading sessions (the remainder of July).  While anything is always possible, a selloff below 2,405.70 prior to the end of July isn't the most probable outcome.  

However, the second observation is that the month of August's been a downer more often than not when the S&P500 prints a new all-time high in July.  8 of the last 10 samples have seen the S&P500 decline in August, on average by -3.13%.  There's been a few very nasty banana peels, such as August of 1998, 1997, and 1990.  Even a powerful year like 2013 took a -3.13% breather in the month of August.  Of the 15 prior July's that traded up to an all-time high, only 6 of them saw the month of August finish in the black.  If history is any guide, there may be some turbulence on the horizon. 

Lastly, it's important to note that when the primary trend is up for the S&P500, turbulence or pullbacks in price are normal, healthy, and welcomed.  Pullbacks only serve to interrupt the primary trend, not reverse its course.  Of the 15 prior July's that traded up to an all-time high, none of them were remembered as "the top" for the S&P500.  We continue to believe higher prices lie ahead, regardless of any possible downturn at some point in August.  

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