While we make decisions based on observable evidence (rather than forecasting),
it is always a good idea to understand bullish and bearish possibilities.
One bullish scenario that could enable the broad market to break from its
recent ten-month period of consolidation (see red arrows in chart above) goes
something like this:
- If you were concerned about the economy, the last major piece of economic
data did not fall into the "imminent recession" range. Last Friday's widely
anticipated monthly labor report showed a gain 223,000 jobs.
- If you were concerned the Fed would raise interest rates in June and kick
off a stock market correction or bear market, Thursday's Producer Price Index
(PPI) provided the Fed with "we may be able to hold off on raising rates" figures
on inflation.
The Last Shakeout Before A Breakout?
The chart below shows what appears to be a "shake out of fear" pattern over
the last eighteen days. All of the above means little if the S&P 500 cannot
break above and hold above 2117.
As outlined in detail on May 8 in our weekly stock market video,
the weight of the evidence still favors a bullish breakout over a bearish breakdown.
Could the bears gain some traction? Sure they could, but we need to see evidence,
rather than anticipate what may happen.
