Two Steps Forward, One Step Back
Investors,
The stock market has been in a bull market for at least the past 12 months, so our bias has to be bullish if we believe in trend-following techniques & analysis.
As the saying goes, “the trend is your friend”, so we may as well become best friends and start thinking about just how high this market can go. Not how high it will go, because none of us have a crystal ball or time machine to know exactly how market dynamics will manifest.
So how about this for the S&P 500?
In this scenario, we’re drawing a fibonacci from the January 2022 highs to the October 2022 lows in order to highlight the 161.8% extension, which is a common price target used by technicians as an optimal or key level.
The implied target from this analysis is roughly 5,900 (or +25% away).
Does this seem like a reach? Perhaps.
However, I have three responses for this rebuttal:
The S&P 500 just gained +35% in the past 14 months, so it’s clearly possible.
This scenario won’t happen without some degree of pain first, therefore we should also acknowledge that bull market take a “two steps forward, one step back” path. We’ve just taken two massive steps forward, so it’s logical to expect (and therefore plan for) the “one step back” phase. In this report, I’ll be covering how I expect that to play out, including downside targets & support levels that I’ll be watching, backed by statistics and different indicators.
The 161.8% analysis is one of the most common & respected levels used by technicians who recognize and understand how fibonacci sequences are common throughout nature and the market. Take the following analysis from April 2023 as an example, where I suggested that the S&P 500 would trend towards ATH’s based on the 161.8% level:
At the time, the 161.8% measurement was telling us that a return to the ATH’s was in the cards…. and it generally has been true! Since that post in April 28th, the index has gained a whopping +16% in 8 months and was only +0.65% away from new ATH’s!
As we plan for a variety of scenarios, which I will cover within this report, I think this 161.8% fibonacci analysis cannot be ignored. Those who ignored the analysis in April probably wish that they didn’t.
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This report is 2,700 words of pure alpha & in-depth analysis on a variety of stock market dynamics, acting as a key highlight for my own personal view on trends, scenarios, and noteworthy metrics.