Let’s Review the Evidence Before Us

We all want to know where the S&P 500 is heading next. That is difficult to do here. I want to review the swath of evidence available to us in order to, at the very least, clarify the conflicting evidence. So, I’m just going to lay it all out for you so you may have access to my thinking, with me.

Bearish Stuff

1. As many of you know, I was among the very few who was willing to count the correction most bullishly (as a two). I am willing to acknowledge that we may even have years before reaching a top of the market. However, what I sort of expected coming out of the low was the orange swoosh. And what I would expect at the end of that swoosh—sometime maybe next May—is a parabolic move.

But instead, we got the parabola right here, right now (and cubic functions often end things). I would expect the big intermediate (orange) 3 way ahead of us to get to 4900-5100 or so, but over the course of months. Instead, we’ve almost gone straight to it in a single gulp. And that seems very bad to me. I find it concerning.

ES

2. Likewise, with $TSLA, I am willing to accept that it could go to $1,200 in its big cycle 5 finishing wave, a giant meme-ish orgasm for the market to climax with. But, as with the S&P, I would have expected that to take maybe at least a year. You can review one recent chart I have for it here. The question before us is, “Where is that cycle (yellow) 4? In front of us still or now behind us?

I think it can peak at a valuation like this, but I don’t think it can sustainably trade at that for some prolonged period of time. And so I’ve been wondering if it’s just going to top out and collapse from these prices sooner rather than later.

3. This came out in the middle of this rally:

Record short. Yikes. I don’t want to bet against them.

4. I do not know if this will still allow us to go up for years:

SHILLER P/E

5. Bonds, which I had thought were in a bearish configuration, suddenly started to look very bullish. (You can review some of my thoughts on that here).

6. Both $LMT and $T lost decade and multi-decade trend lines of support. That feels ominous. You can read about those here and here.

Bullish Stuff

7. Obviously, things feel like we’re in a powerful impulse wave. No real signs of distribution yet. No hard reversal yet, either.

8. I had some doubts on crypto, and I complained about those here. And yet, today it now looks like it wants to break sharply higher. My fears that it was distributing may have been unfounded.

9. Is $BA finally breaking out?

BA

Is the market going to tip over while this begins a multi-month rally? Or is this a bull trap?


So, I want to have strong conviction about a move and I want to be right about it. For much of this year, I have been good about meeting those two conditions. I have been strongly convicted that the markets would continue higher, and I’ve been right about that. But now I’m not so sure. I feel like the sum of the evidence may now be pointing down, but at the same time I worry that the market may chase entirely away from us.

I hope we get some clarity soon. In the last count post, I identified bull/bear alternatives. I don’t like to do that often, because everybody always says, “we could go up or we could go down” and when we do one of those two things, they can claim victory, and that seems unhelpful. I rather stake a claim and be right more often than wrong. Now, I was right about the first two-thirds of this rally, but it’s continued strength has surprised me. In either of those two counts, we should see a retracement soon and hopefully the nature of that will help us to determine where we will be going next with some conviction.


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