The S&P 500 is due another bull year, according to an analysis by Ari Wald, Technical Analyst at Oppenheimer.
Wald makes the point that the typical cycle duration for a S&P bull market is between 33 and 35 months (see Chart). So far, using the February 2016 low as the cycle low, he calculates the S&P 500 has gone up 47% over a 22-month period. This is in contrast to the average cycle of 107% over 35 months and median cycle of 77% over 33 months.
If above-average valuations lead to below-average forward returns, he postulates that the final return through this cycle may be closer to the median (77%) rather than the average (107%). More importantly, however, Wald says that above-average valuations are unlikely to alter the typical cycle duration which is in the 33 to 35 month range. As such, he says another year of gains is his base case road map until market top signals develop.