What happened last week.
What we're watching for next week.
It was an interesting week. The Bulls are within shouting distance from making a new all-time high in the market and the Bears are dug in at 2,930. It's a classic battle of wills and determination.
The chart below shows the Year-over-Year Percent change in the S&P 500 Index. The Red Zone is the area where market risks are the highest. You can see that the market has pulled back from the brink and has now moved up and away from the Red Zone. This is a bullish indicator, but it's only one of many indicators that we follow here.
Chart 1. S&P periodic returns.
Positive numbers all around. Up 15.4% year to date. What's not to like? For one, we've been in the wilderness for 197 days now. The wilderness is the number of days since the last high water mark. How many times you want to earn the same dollar on your investments? Think about it.
Chart 2. Distance from Key Markers
Wow. Up 23% from the most recent low water mark? Fantastic! But still below the previous high water mark, by 1.3%. Will the Bulls push through the old high, or will the Bears push them back?
Are you an optimist? Then you probably think it's only a matter of time before the bulls break through the old high of 2930. In my opinion, there's a 60-40 chance that it could happen. But the better question is, what will the bulls do after that? How much ammo do they have to keep pushing the market higher? Think about it.
Final Thoughts
The stock market blogosphere is divided between Bulls and Bears, which is normal. If the Bulls are once again denied the victory of making a new market high, the Bears will do a victory dance. If the Bears can't stop the strong momentum that the Bulls have, they will probably rush to cover their shorts, which will add further impetus to the bull market.
My opinion is that the Bulls will probably break through to a new high, but I'm not very confident that they can do much more than that. I think valuations are already stretched and the upside for this market for the remainder of 2019 is 5-10% from here.
If you want more info about how to set up a solid Plan B, send me a message at info@zeninvestor.org
For a full analysis of the probability of a bear market or a new recession, see my Monthly Intelligence Report.
As always, if you like what you see, or have suggestions for improving this recap, leave a comment below, or email me at info@zeninvestor.org