Indexes holding up better than stocks and are we at a momentum driven bull market?

From last post I commented above the pending high risk of a correction because the major indexes normally retest their 200 DMAs (200 day moving averages) within 12 months. So the 12th month should be about the mid to late November but thus far no correction as I had anticipated. I did initiate some long positions (40%) and short positions (about 20%) but with the market not doing much and the risk involved I had reduced my positions to 20% long. While the last four weeks the major indexes had consolidated or pause at current levels, individual stocks had underperformed with stronger corrections.

Surprisingly, last Thursday's sharp sell off came close to setting a strong short term (and modest medium term) buy signal if the SP500 dropped +1.5% further down (like in early October had the SP500 also dropped another +1%.) So with today's strong rally, it could be another move higher like the rallies of late August and early October. The risk could still be there as I warned from my last post but I'm warming up to the fact that this long term bull market has strong momentum behind its back.

In the charts below I will look at the times when the SP500 have gone over 12 months without retesting their 200 DMAs and what were the outcomes. Most of these occurred in the midst of the bull market run from the early 1980s to 2000.

The chart above has the SP500 go nearly 15 months before a sharp correction in October 1997 to eventually retest (touched) its 200 DMA and then make a quick bounce rally back up. A note, the SP500 did not go beyond 12 months during the parabolic dotcom bubble of 1999 to March, 2000. The Nasdaq bubble burst in March, 2000, after going nearly 18 months without retesting its 200 DMA.

The chart above shows two strong rallies that lasted nearly 15 months each before quick sharp corrections and in both cases they both recovered to continue the momentum trend higher (though the 1st correction was followed by a long consolidation/pause.)

The chart above again saw a quick sharp sell-off below the 200 DMA and then a recovery before moving higher.

The last chart above, was the rallies that started them all for the secular bull market of early 1980s to the eventual top of 2000. The first 2 rallies lasted nearly 15 months and the last two lasted less than 12 months before they retested the 200 DMAs. The Crash of 87 halted the five years of an exceptional rallies and return for investors.

My conclusion from the charts, is that an eventual retest of the 200 DMA will likely be quick and sharp... and will spook the investors. But the fact that this type of market behavior of strong lasting momentum rallies have occurred during long term bull markets.