Just as we are about to mark the 1 year anniversary of this Stage 1 Base in the S&P 500, the market is showing us clues that it may want to stretch its legs into price points we have not seen since the bear market of 2022.
Now it's easy to get excited and bullish after a few bullish engulfing days but zooming out a bit we do see a clear sign (red lines) that buyers have been stepping up and putting in new pivot highs since the lows of 2022.
As bulls and bears continue to meet at what seems to be equilibrium at 420, that will be where the real show down occurs. If we can finally break this 420 area and continue this higher trend climb higher then we will have successfully entered the stage 2 breakout phase. As we know, the length of time a base tends to form, often times equals around the time the following stage follows suit for.
The best case scenario would be a year-long breakout that catches most traders either flat footed with cash on the side lines afraid to put it to work or short as most of the data shows to be the case.
The worst case would be something along the lines of a bull trap where we push higher to say 430 only for sellers to hold the line and the continued higher pivot lows start to get tested as the market takes the elevator down.
Looking at most of the major headline fears to cause the market to see the worst case scenario don't seem to really carry much weight unless we get a new scary headline. Inflation is old news as it's been fading since the summer. Rate hikes will start to become rate cuts as the FED has helped blow up a decent amount of regional banks giving them more problems to try and solve. The regional bank problem is self cleaning, like any industry, stocks and companies go bankrupt every day, right now the lights are just focused on a few crappy banks. Anytime you hear the headlines of "it's going to be just like (insert last time)" that rarely happen. As the headlines are to expect another 2008 crash, when that rarely would be the case.
This base might not breakout this week, this month or this quarter but with enough time we should see this stage 1 base turn into a stage 2 breakout. Just keep a steady pace with your savings and investing. This is not the time to sprint hard every day, keep the valet jog going as the market works itself out, which with enough time ends up being higher then where it is.
Pre Market Monday 9AM Zoom Link
Post Market Monday 5PM Lesson Review
Macro Rotation Outlook