S&P 500, Nasdaq holding above this key technical level for the longest stretch in over a decade. Here's what's next.

By Isabel Wang

The U.S. stock-market rally is showing no interest in hitting the brakes

It looks like the stock market doesn't need pullbacks when it can just keep climbing.

Remember when the stock market used to take a breather every once in a while?

Neither do the S&P 500 SPX nor Nasdaq Composite COMP. This year, the indexes have been sitting comfortably above a key technical threshold for the longest stretch in more than a decade - and showing little interest in coming back down.

The large-cap S&P 500 and the tech-heavy Nasdaq have traded above their respective 50-day moving averages for 112 consecutive trading days, the longest stretch above those key levels since March 2011, according to Dow Jones Market Data.

The 50-day moving average (MA) is one of the most widely used technical indicators in the stock market. It plots a security's average closing price over the past 50 trading days, serving as a trend line to indicate short- to medium-term trends.

A common refrain among stock-market technicians is that the longer the benchmark indexes hold above the widely watched 50-day MA, the more bullish the market conditions would be for investors. It implies improving market strength in the near term.

Going back 35 years, a run of that length has only happened four times since 1990 (see table below). The S&P 500 has historically gained an average of 1.7% one month after trading above its 50-day MA for at least 110 sessions, and roughly 5.1% over the following six months, according to Dow Jones Market Data.

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To be sure, both the S&P 500 and Nasdaq have consistently closed above their 50-day MA since May 1, when the stock market enjoyed a stunning turnaround after President Donald Trump's tariff plans in April sent the market into a tailspin.

But so far, the rally is showing no interest in hitting the brakes, with all three major indexes riding a seemingly relentless record-setting run - fueled by the Federal Reserve's first interest-rate cut in nine months, strong second-quarter corporate earnings and renewed enthusiasm around artificial intelligence.

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"The market is going through what I call volatility cycles - where you have a lot of volatility at major tops and bottoms, but within the middle of a bull market, stocks just grind higher within a very narrow bullish channel," said Mark Arbeter, a technical analyst and the president at Arbeter Investments.

Arbeter said that despite the rally, there are still many investors who were caught off guard by the April selloff and have yet to return to their normal equity allocations, since "this move higher has been wrought with fear that something's not right."

As a result, all these investors remain underexposed and are waiting for a correction that may never come, he added.

"I like to call these rallies lockout rallies, because of the fact that we don't get any pullbacks, but it locks people out that are waiting to buy at lower prices," Arbeter told MarketWatch via phone Thursday. "So what's happening is they throw in the towel, [and] especially as we get towards the end of the year, people are forced to start putting money back into the market."

U.S. stocks finished lower on Thursday as the government shutdown entered its ninth day. The Dow Jones Industrial Average DJIA fell 243 points, or 0.5%, while the S&P 500 shed 0.3% and the Nasdaq lost 0.1%, according to FactSet data.

-Isabel Wang

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