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Stocks Hit New Highs – Further Gains Ahead

By Brett Eversole
Thursday, July 14, 2016

The S&P 500 hit a new all-time high on Monday.
The Dow Jones Industrial Average followed suit on Tuesday.
This might have you worried. Most folks expected a crash... But we're seeing new highs instead. If this has you confused – or scared – you shouldn't be.
New highs aren't something to fear. They're something to celebrate... especially in today's case.
You see, today's breakout is rare. And based on history, it could lead to a 16% gain over the next year. And that means you should be buying stocks today... not selling.
Let me explain...
The stock market is an odd place. After over a year of going nowhere, stocks finally break out. And investors meet the news with a chorus of "boos."
This is like your favorite NFL team finally winning the Super Bowl... and your response being, "Yeah, but they'll blow it next year."
Past success is a good indicator of future success... especially in the stock market. And today's situation is a good indicator of more gains to come.
You see, stocks just achieved something rare. It has only happened 20 other times going all the way back to 1928.
The S&P 500 just reached its first one-year high in more than a year.
Think about what's going on here... Stocks were either falling or going nowhere for at least a year... and then they broke out.
This is the kind of thing that happens before a major move higher in stocks. History proves it...
The last time this happened was October 2009, coming out of the Great Recession and stock market bust. That would have been a great time to buy stocks.
Before that, the last occurrence was September 2003. That was only a few months after stocks began recovering from the tech bubble.
Looking farther back, we see similar instances in 1995, 1988, 1984, and 1982... And all of these were fantastic times to own stocks.
Over nearly 90 years of data, this has only happened 20 other times. And stocks increased 16% over the next year, on average, during these other instances.
Importantly, only two of these signals led to losses (in 1938 and 1948). Said another way, this indicator hasn't led to losses in nearly 70 years.
We can't know the future. But history tells us this is a signal we want to follow... And a 90% win rate with 16% average gains looks pretty darn good to me.
Today, stocks are hitting new all-time highs... But you shouldn't be scared. You should be happy. Because history tells us more gains are on the way.
Now is not the time to sell... Now is the time to buy.
Good investing,
Brett Eversole

Further Reading:

Stocks hitting a new high is just one reason to be optimistic about the market today. Steve recently noted a classic contrarian signal that suggests the market has plenty of room to run higher. Get the details here.
And Steve shared another bullish indicator for stocks last month. This is "a massive 'contrarian investing' signal," he writes. Read more here.

Market Notes


Today, a piece of good news for America...
Regular readers know we look at several sectors that tell us what's going on in the U.S. economy. In the past, we've discussed how credit-card companies, ski-resort operators, and pool-supply firms can show us how people are spending their money. And that's true in the manufacturing sector, too.
Last month, we told you about $100 billion manufacturing conglomerate 3M. Today, we're looking at another "bellwether" of the sector: Honeywell (HON). The $90 billion giant employs nearly 130,000 people around the world – including nearly 50,000 people in the U.S. – and produces a wide range of products for the airline, automotive, chemical, construction, and medical sectors.
You can see in the chart below that Honeywell shares have been rising for much of the past seven years. They're up more than 400% from their March 2009 low... and hitting new highs on a regular basis. If manufacturers are hitting new highs, "things can't be all that bad" today...

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