The S&P 500 closed at a record high this week for the first time in two months, but data cited by investor Michael Burry shows the four-day rally that drove it there has only happened three times before — and two of those instances occurred around the dot-com bubble's peak and early unwind.
The index gained 1.79% on Tuesday to finish at 7,736.52, powered by strong corporate earnings and easing tensions in the Middle East. The rally marked the S&P 500's first record since early March, snapping a two-month drought.
A Rare Historical Pattern
According to BTIG data cited by Burry, the four-day rally behind the record has only three precedents: April 23, 1999; March 21, 2000; and November 9, 2020. The first two dates bracket the dot-com bubble's peak and the early stages of its collapse. The third came just after the 2020 presidential election, during a post-election rally that eventually faded.
The pattern doesn't guarantee a downturn, but it's a statistical outlier that has historically preceded trouble. Two of the three prior instances were followed by significant market declines within months.
What's Driving the Rally Now
Tuesday's jump was fueled by a batch of better-than-expected earnings reports and a de-escalation of tensions in the Middle East. Yardeni Research raised its year-end S&P 500 target to 8,250 from 7,700, calling the new estimate potentially too conservative given the strength of corporate profits.
Goldman Sachs President John Waldron pointed to broadening profit growth beyond the technology sector as a key fundamental driver. But he also flagged a real risk underneath the optimism, without specifying the nature of that risk.
Narrowing Leadership
Despite the headline gains, the rally's breadth is shrinking. The cap-weighted S&P 500 has outperformed its equal-weighted counterpart by roughly 4% over the past several days. That gap suggests a narrowing of market leadership, with a handful of large stocks doing most of the heavy lifting while the broader index lags.
That kind of divergence often signals that the rally is fragile. If the biggest names stumble, the index could give back its gains quickly.
On Wednesday, the S&P 500 slipped 0.17% to 7,723.55, snapping its four-day win streak. The Dow Jones Industrial Average, however, closed at a record for a fifth straight session at 54,349, showing that the rally is still alive in other corners of the market.
The question now is whether the S&P 500 can hold above 7,700 and broaden out, or whether the historical pattern will repeat. Investors will be watching the next batch of earnings reports and economic data for clues.
