Technical Analysis Update: Where Do Stocks Go From Here?
It’s time for an update on the markets.
The S&P 500 has hit the all-important level of 3,000. The big question now is “what’s next?”
In the near term, stocks could correct. The euphoria of the partial trade deal (however tenuous) and a Brexit deal in the UK needs to wear off before we start the next leg higher. Stocks are right at the top trendline of a consolidation pattern they’ve been forming over the last four months.
The fact that we didn’t simply break through this line (shown above) on heavy buying suggests stocks will take a pause here, if not correct.
However, the big picture for the market remains very positive.
As I noted earlier this week, stocks move based on liquidty, not the economy. The Fed is now providing $160 billion in liquidity to the financial system every month. That is VERY positive for stocks.
Moreover, the fundamentals are improving dramatically. The latest spate of economic data in the U.S. has shown a nice uptick.
Even real-world economic indicators, which were warning of a slowdown in the first half of the year, are starting to bottom and suggest a new bull market is approaching.
One such indicator, copper, is shown below.
Throw in the fact that investor sentiment is extremely negative and we’ve got the potential for a significant bull market in the coming weeks and months.
Bearish investors + tons of liquidity + improving fundamentals = investors will start wanting to buy stocks soon.
Again, this is the intermediate-term forecast into year-end. In the very near term, a brief correction of sorts should happen. But I’d view that as a buying opportunity.
Editor, Money & Crisis