514-393-3653 info@phases-cycles.com

“The S&P 500 has come a long way from the bleak days of late-December when the Index made its low at 2,346. The S&P 500 is now up 24% in less than four months, a performance that would be outstanding on a yearly basis! It is just 1% from its all-time high. Other major market indices in New York continue to track higher, making their own way back towards their respective highs of last summer.

What is remarkable about this rally is how straightforward and trouble-free it has been to date. The S&P 500 has advanced within a clearly defined upward trend channel, moving gradually from near the upper boundary line toward the lower boundary more recently as the pace of the rally has slowed somewhat. Upside obstacles in the form of resistance levels, downward-sloping trend lines and Moving Averages have been bowled over one by one. Each sell-off was modest and quickly met with renewed buying support. The NYSE and S&P 500 daily advance-decline lines hit new highs. The number of stocks making new 52-week highs has been expanding.  And there are no negative divergences in internal momentum that would be cause for concern.

Confirming its strength, the S&P 500’s 50-day Moving Average recently crossed above its 200-day Moving Average. We said two weeks ago that “the next challenge for the S&P 500 is to confirm a solid foothold above 2,820, and a sustained move above 2,860 would continue the existing up leg.” The S&P 500 has now spent most of the last month above 2,820 and the last two weeks has seen a breakout above 2,860. We expect the S&P 500 to approach its all-time high at 2,940 and possibly exceed it. Most importantly, the longer the S&P 500 stays above 2,820 the greater the possibility that the potential minimum target of the recent inverse head and shoulders pattern – about 3,300 – is a valid one. Any sustained move above 2,940 should silence the bears completely.

However, with some maturing cycles in mid- and late-May, this may be the time period for the current upward trend channel to falter a bit. A rest is overdue and a moderate correction would be a normal event, possibly back towards the 200-day Moving Average in the high 2,700s, before new all-time highs are reached.

Given that the S&P 500 made a peak in the mid-2,800s in January 2018, an all-time high in September 2018 and is now heading back to that area, it can safely be anticipated that some bears will declare this pattern as a “triple top” and declare the end of the bull market. Those who watch the bullish advance-decline and other statistics mentioned at the end of paragraph two, shouldn’t fall into this bear trap!

New York and Toronto continue to look very bullish, with substantial upside targets. Both markets are due for an identifiable and normal correction but the upside momentum is such that new all-time highs for both the S&P 500 and the S&P/TSX Composite Index are probably the first order of business.  Eventually there will be a re-visiting of the respective 200-day Moving Averages.  But as we keep saying, “upside surprises” remain the defining characteristic of this bull market.” (17-Apr-19)