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:
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.
Commenting on the strength of the move, I wrote:
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:
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.
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.”
Have a great weekend,