US Markets

The stock market just set another record, this one going back to 1972

Key Points
  • The S&P 500 has closed below its 10-day moving average just five times over the past 70 days, the fewest instances since 1972, according to FOREX.com.
  • The period is relevant as it tracks the period during which the Fed has resumed its balance sheet expansion.
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The seemingly unstoppable U.S. stock market continues to set new records, with the latest standard a trend that hasn't been beaten since 1972.

One gauge closely watched by traders is where the market is in relation to its moving averages, which track the market's performance over various time periods.

In this case, FOREX.com looked at how many times the S&P 500 has closed below its 10-day moving average over the past 70 days, a time frame used because it entails the time since the Federal Reserve started expanding the bond holdings on its balance sheet.

The result is that the index has had just five such closings over the period, the lowest going back to 1972, or some 48 years, FOREX.com said, citing data from Quantitative Edges.

Fed officials have insisted that its latest round of bond buying is not like the quantitative easing it instituted during and after the financial crisis. Instead, the central bank has been conducting operations in the short-term repo market to keep its benchmark funds rate within the range the Fed uses as a target.

But stocks have risen almost perfectly proportionately to the expansion in the Fed's balance sheet.

"By this measure, US stocks haven't seen this consistent of a rally since most of us have been alive," Matt Weller, global head of market research at FOREX.com, said in a note. "Of course, as any Statistics 101 student will tell you, correlation does not necessarily indicate causation, but given the remarkably reliable rally we've seen, US index traders should definitely be paying close attention to any changes in the Fed's 'Not QE' schedule of repo purchases."

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