Hello everyone,
The S&P 500 (SPX) is up 25% since the late-October lows. After such a big run in a short time, it’s tempting to think we’re due for a significant correction. That’s certainly possible, however:
We just recently had multi-year breakouts in diverse sectors & regions.
Price indicators/models remain bullish.
Sentiment & positioning for the broad market is not a concern yet.
In today’s post, I will discuss the above three bullet points in more detail and assess where we could be in the market cycle.
Price charts
This section is the heart of today’s post. It explains, in a straightforward way, the main reason why I remain firmly bullish.
Over the past year, we’ve seen a rolling series of major breakouts in diverse sectors and global regions. I visualize this as a flight of stairs that firmly supports us as we gradually climb each level.
In early 2023, we saw big breakouts in Greece and Argentina.
In July 2023, significant breakouts were seen in Technology (eg. Computer Hardware), Industrials, Homebuilders, India, Japan, and Mexico.
By Oct 2023, many of the summer ‘23 breakouts got retested.
In recent months, we’ve seen multi-year breakouts in Financials (eg. EUFN, WFC, Mortgage Finance Index), Healthcare (eg. PPH), Railroads (CP), Bitcoin, and Europe.
Today, we see it in Materials, Energy, and additional Emerging Markets (eg. Peru). I will discuss commodities more near the end of today’s blog.
The next major breakouts to watch are Canada, Australia, Chile, Brazil, Southeast Asia, and the broader EM ETFs. Think of these as more fuel left in the tank.
Given the broadening participation and fresh breakouts, I do not see a significant pullback in the broader indices. The market keeps climbing stairs in an orderly, healthy fashion. I’ll add more nuance to this later in the post.