A bevy of big gains

Stocks have been running hot, and investors are responding. More and more extremes have been triggering, helping to push valuations high amid low volatility. 

The past few weeks have only added to a historic run from the months before that. At various points during the past year, we've looked at streaks of large gains in the S&P or different sectors, and it's only gotten more remarkable. Even with a breather over the past couple of sessions, the S&P has never before seen a year with more +1% daily gains versus -1% losses.

The past year has seen 32 more big gains versus losses, more than the net +27 days heading into September 1929, +26 days into February 1934, and +25 days into April 1998.

When we zoom in on the time periods that saw nearly as many big gains vs. losses as the past year, we can see how stocks struggled to hold the momentum.

The last instance, in 1998, preceded a very rocky period, but stocks didn't ultimately peak for a couple of years.

When we look at the major sectors, the ones that currently have a record or near-record net number of big positive days include Discretionary, Industrials, Materials, Communications, and Financials. For what it's worth, all of them preceded at least multi-month exhaustion points.

The past year has been a heady one for investors. One had to work hard to lose money, and those kinds of easy gains stoke complacency. Based on the record number of days with big gains that investors enjoyed offset by the small smattering of big losses, it's no wonder that we see sentiment at or near record levels.

Until very recently, momentum and internal participation have been good, even excellent. That helps to delay a reckoning from sentiment extremes. But essentially, every time that investors have been in an environment like this, with such easy gains, it has preceded at least months of poor or limited returns.