While investors make decisions based on observable evidence (rather than forecasting), it is always a good idea to understand the bullish and bearish possibilities going forward.
Here’s a chart of NYSE Composite Index (NYA). Lots of sideways action here. But…
Here’s one bullish scenario that could enable the broader stock market to break out above its recent ten-month period of consolidation to new highs (see red arrows in chart above). It goes something like this:
If you were growing concerned about the economy, the last major piece of economic data did not fall into the “imminent recession” range. Last Friday’s widely anticipated monthly labor report showed a gain 223,000 jobs.
If you were concerned the Fed would raise interest rates in June and kick off a stock market correction or bear market, Thursday’s Producer Price Index (PPI) provided the Fed with “we may be able to hold off on raising rates” figures on inflation.
The Last Shakeout Before A Breakout?
The next chart is of the S&P 500 Index (SPX) and it appears to show a “shake out of fear” pattern over the last several days. That said, the scenario above will mean very little if the S&P 500 cannot break above and hold above 2117.
S&P 500 Index – A breakout pattern in the works?
As we’ve outlined recently in blogs and video, the weight of the evidence still favors a bullish breakout to new highs over a bearish breakdown for the stock market. Could the bears gain some traction? Sure. But we need to see evidence, rather than simply anticipating what may happen. Thanks for reading.
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Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.
