All-Time Highs Likely Not Attainable, Nor Sustainable

Let's take a stroll down memory lane.

It's a short stroll, to just over a year ago, when the Dow, S&P and NASDAQ each made all-time highs.

The dates, and the levels are shown below:

S&P 500: 2134.28 (intra-day); 2130.82 (close), May 21, 2015 (both)
Dow Jones Industrials: 18,351.36 (intra-day); 18,312.39 (close), May 19, 2015 (both)
NASDAQ: 5164.36 (intra-day, June 24, 2015); 5160.09 (close, June 23, 2015)

For the first trading day of May, the forward move was largely based on nothing other than bad economic data (manufacturing output is at its lowest level since 2009), other than the "good" news that Atlantic City avoided defaulting on a $1.8 million bond obligation and possible bankruptcy.

When the Jersey shore city announced they were making good on their scheduled payment to creditors - right around noon - that was enough for the markets to get off the proverbial flat-line and go diagonal the rest of the session.

Stocks ended the day with solid gains, erasing nearly half the losses from the prior week, putting some skepticism to the time-worn "sell in May and go away" adage.

Anyone believing that the US averages are going to meet or exceed the all-time highs from one year ago are betting against the odds simply because the May through October time frame historically offers the lowest returns of any six-month period, based on data from 1928 to the present. [See chart at right]

Not only that, but the continued creep of deteriorating business conditions presages a continuation of the slow growth that's been typical for the past seven-plus years at best or a slide into outright recession, at worst. Recall that the first estimate of first quarter GDP was a disappointing 0.5%, which is pretty darn close to going backwards.

Thus, with the numbers above as targets, it is clear that the indices would have to move more than two percent between May and October - and sustain those levels - in order to attain and hold new all-time highs, an unlikely event.

For hard-core stock investors, this is a cold truth, one which promises to inflict a high degree of pain and loss for those who play against the odds.

Monday's Millings:
S&P 500: 2,081.43, +16.13 (0.78%)
Dow: 17,891.16, +117.52 (0.66%)
NASDAQ: 4,817.59, +42.24 (0.88%)

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