Chart of the Day - Wednesday, December 30th, 2020

$SPX up 14% the past 2 months. Only 7 other occurrences in 40 years. 6 of prior 7 went much higher in months ahead because all happened at major lows (like March of this year); 1987 started after SPX dead flat for 9 months (box).

So, current instance nothing like the others pic.twitter.com/beQ4eSrPjl

— Urban Carmel (@ukarlewitz) December 30, 2020

Today’s Chart of the Day was shared on Twitter by Urban Carmel (@ukarlewitz). It's a monthly candlestick chart of the S&P 500 over the past 40 years, along with a 2-month rate of change indicator below. The S&P 500 is up more than 14% in the past two months. As Urban points out, this sort of strength is rare and has only occurred seven times in the past four decades. As you can see, nearly every one of these occurrences saw further gains in the months that followed. The most recent occurrence took place in May of this year, and the S&P 500 is up more than 20% since. It's easy to say stocks have gone "too far too fast" but history shows us that strength often begets more strength.