It's Almost Like We're In A Bull Market
Investors,
The S&P 500 just had its highest daily & weekly close of all-time, finishing above 5,000.
In a week absent of material economic data, investors were free to dance & let loose.
(Read until the end to see how I think the market could behave going forward)
On Friday alone, there were 47 stocks in the S&P 500 that made new 52-week highs, of which 30 made new all-time highs. Out of the group of 30 stocks, the majority came from two sectors:
Technology: 13 stocks
Industrials: 8 stocks
This is important for two reasons:
Technology is the largest weighting in the S&P 500 at 29.9%. If tech is doing well, it’s going to give a strong boost to the broader index performance. This was one of the key market dynamics in 2023. While some decided to complain about it, or wrongly say that only the Magnificent 7 were going up, I applauded the strength in tech as confirmation of the bull market (because tech is almost always the strongest sector during a bull market). Not only is something like XLK 0.00%↑ going up tremendously, but there’s broad-based participation within the sector, given by the fact that equal-weight tech RSPT 0.00%↑ is also at new all-time highs and up +41.5% since the beginning of calendar year 2023.
The industrial sector is the most correlated to the S&P 500, so this helps to provide additional confirmation beyond what I mentioned above for tech. The industrials ETF XLI 0.00%↑ made new all-time highs in July 2023, again in December 2023, and once again in February 2024. This ETF is comprised of companies like Caterpillar, United Rentals, Deere, Union Pacific, and General Electric and they are hitting new all-time highs. These aren’t sexy, innovative, or exciting companies. They are boring manufacturing, transportation, & industrial stocks. Even if you want to look at the small-cap industrial stocks (PSCI) or the equal-cap weighted version of industrials (RSPN), these both achieved the highest weekly close of all-time on Friday.
Call me crazy, but I think these are extremely important developments, mirroring many of the same dynamics that occurred in 2023. Then consider the fact that the three major U.S. stock market indexes are all making new all-time highs (which is historically correlated with bull markets & uptrends). Then consider that we’re seeing overbought signals on long-term timeframes (which is historically correlated with bull markets & uptrends). Then consider that seasonality is strong in election years.
I’ve been one of the more vocal bulls since last April, both on the economy and the financial markets. While there have been moments where I’ve prepared for more downside or perhaps shifted into a more defensive stance, the nature of the bull market has been resilient. Regarding the stock market indexes in the United States, I would focus on the “breakout, retest, rebound” setup that I love to trade during uptrends.
Here’s what that looks like for the S&P 500:
I still believe that the 161.8% fibonacci target is the logical magnet for where price will trend over the coming 9-18 months, subject to change based on market conditions.
I’m going to keep this edition short & sweet because I had a long travel day from Italy to Romania, but this provides a concise recap of my current market view. In tomorrow’s premium edition of Cubic Analytics, I’ll be sharing a thorough analysis of my long-term portfolio holdings & giving complete transparency into my investments.
As always, I’ll be sharing more in-depth thoughts on market dynamics with exclusive analysis that you can’t find anywhere else. If you’d like to access that report, please upgrade your subscription to either a monthly or annual plan using the link above.
Best,
Caleb Franzen
DISCLAIMER:
This report expresses the views of the author as of the date it was published, and are subject to change without notice. The author believes that the information, data, and charts contained within this report are accurate, but cannot guarantee the accuracy of such information.
The investment thesis, security analysis, risk appetite, & timeframes expressed above are strictly those of the author and are not intended to be interpreted as financial advice. As such, market views covered in this publication are not to be considered investment advice and should be regarded as information only. The mention, discussion, and/or analysis of individual securities is not a solicitation or recommendation to buy, sell, or hold said security.
Each investor is responsible to conduct their own due diligence and to understand the risks associated with any information that is reviewed. The information contained herein does not constitute and shouldn’t be construed as a solicitation of advisory services. Consult a registered financial advisor and/or certified financial planner before making any investment decisions.
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