A recent, sharp ascent in the S&P 500 is drawing comparisons to the volatile period leading up to the dot-com bubble's peak, sparking concern among some market experts. Jonathan Krinsky, chief market technician at BTIG, highlights that the broad market index has surged over 5% into a 52-week high within the last four trading days. This specific combination of events has only occurred three other times in the past three decades: April 23, 1999; March 21, 2000; and November 9, 2020.
Krinsky notes the historical parallel: "March 21, 2000 was the day before the dead high of the dot-com bubble." While acknowledging the limited statistical significance, the pattern is deemed 'notable'. Following the April 1999 incident, the S&P 500 experienced a wide sideways trading range for seven months, including a roughly 10% decline. The exception was November 2020, which preceded a multi-month uptrend. Krinsky states, "Bulls will hope it's November 9, 2020. We have our doubts."
Adding to his apprehension is Microsoft's recent performance. The tech giant's stock has jumped nearly 27% in four trading sessions, ending Tuesday. Krinsky points out that the only larger four-day move for Microsoft occurred in 2000. He draws a vivid parallel: Microsoft hit a record high on December 30, 1999, then lost 60% over the next ten months, before a 29% four-day rally. Similarly, Microsoft also reached another historical all-time high, before falling 37% over the next 11 months, preceding this latest four-day surge. Krinsky quips, "These are the two largest four-day rallies in MSFT history, never repeats, but often rhymes."
Though not explicitly predicting a market top, the chart analyst suspects that this current momentum-driven rebound is vulnerable. He believes investors who suffered losses during July's market unwind will likely use this rally as an opportunity to sell. Krinsky describes the broader market dynamic as a game of "musical chairs," with capital rotating between momentum and value stocks. He warns, "At some point the music stops, and participants might not be able to find a chair."
Krinsky's concerns resonate with recent warnings from investor Michael Burry, who on Tuesday suggested the market might be nearing a "major top" reminiscent of the 1987 crash. However, Krinsky focuses more on the potential failure of the current momentum rebound rather than an outright market collapse.
