As I look back on our efforts to follow and understand the stock market over the past year, one major lesson learned stands out to me – strength is not to be ignored.

Back in March of this year, just before the S&P 500 triggered a new SSI Entry signal I shared this chart:

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At the time I said that the bears were still in the driver’s seat, but the strength of this 12% in a month rally was not to be ignored.

Then, a few weeks later in April, the rally had continued, the SSI trend had turned up and a new SSI Entry signal in the S&P 500 was triggered.

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Commenting on the strength of the move, I wrote:

The move in the S&P 500 has been impressive … even unprecedented. I’ve been leaning bearish. I was just expecting a strong countertrend rally to be followed by more downside. The strength of this rally, however, has put me back on my heels with respect to my bearish beliefs.

For the next two and a half months we watched the S&P 500 wrestle with the very strong overhead resistance from the massive amount of trading volume centered around the 2050 – 2125 area. There were at least a half dozen significant breakout attempts that all failed.

Then their was Brexit. It was a two-day sell-off that had all of the bears believing that they’re dreams of desolation had finally come true … followed by a four-day rally that completely erased the losses of the sell-off. I called it a “frying pan to the face” for the bears … and probably just what the bulls needed to finally breakthrough the overhead resistance to new highs.

Here’s where we stand today, three weeks later:

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Keep in mind that all the while my “beliefs” about the market have been bearish. My favorite macro analysts were screaming bears … and for sound logical reasons.

But I’ve been around long enough to know that the markets rarely follow anyone’s personal script, no matter how smart they are … and that strength is not to be ignored.

I’m currently expecting higher prices to come … probably throughout the summer. I’ve updated my cycles analysis based on the latest events (yes, cycles are as much art as science). The latest analysis is showing a top around late August / early September.

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That feels about right to me. It’s just enough time for the bulls to become complacent and the bears to be thoroughly beaten … and for the market to set up its next consensus busting “event.”

What fun!

Have a great weekend,

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