Last week we saw a lower low as expected. We also saw the Bears be very aggressive early in the week which signals that the Bulls will have a hard road in front of them. However, we should see a bounce by the Bulls to begin as early as Monday. 268 is the first Bulls target. The Bears will then have a good chance to sell the upcoming bounce and retest the low. This is setting up a confused market which equals a classic trading range that should last at least a few weeks.
Statistics for 2 down weeks on the S&P: next week historically, has a 58% chance to close in the green, with an okay profit factor.
We are now in the final phase of the long 8 year bull market. We just saw the exhaustion phase of the Bull move. Since we have finally seen the abrupt pullback we have been mentioning, Bulls will now use their get out of jail free card. We are likely to see a large trading range develop over the next few weeks and that may last 1-3 months. Bulls will then try at the least to retest of the January high. So while we believe this pullback is a buying opportunity. The Bulls safety net is now gone, until a decisive new high is reached.
The period above the above the moving average came to an end at 64 weeks. This was the longest period above the average in the history of the S&P! So we clearly saw a historic bull move. Markets have inertia and this is why we believe Bulls are still safe and will likely, at least make a clear lower higher over the next few weeks/months. So for now the chance of this turning straight into a bear market are less than 20%.
Long-Term Market Outlook (Updated 11/5/17).
This Week: will be very data heavy.
Next Week: The market will be closed on Monday for Presidents day. We will also see the Fed minutes on Wednesday.
Trend Following Models:
Our long-term models are Bullish.
Our medium-term models are Bearish.
Our short-term models are Bearish turning Bullish.