As Deutsche Bank warns in a note over the weekend, the S&P 500 is “long overdue for a pullback” for one simple reason: the BTFDers (and central banks) have overextended the current rally in the S&P 500 to the point where it is now one for the history books. Traditionally, 3-5% selloffs in the S&P 500 have occurred on average every 2-3 months. By comparison, the current rally has now gone 10 months without even a moest a 3% correction, “making it the 3rd longest since World War II without one.” In fact, as the chart below shows, the only times an equity rally ran longer without a 3%+ selloff was in 1993 (11 months) and 1995 (1 year).
Not surprisingly, so far in 2017 virtually all of the (quite modest) selloffs that occurred, were associated with US political and geopolitical concerns and events – around the French election; the Comey dismissal; tensions with North Korea; US administration turnover and terrorist attacks
This post was published at Zero Hedge on Sep 4, 2017.