The stock market rallied last week on the back of the Fed’s promise not to hike rates, just have to wait for rate cuts, but rate cuts are coming.  This rally from the April 19 low took out the previous high and appears to be on schedule for a breakout.  We blogged several times before that this rally from the April 19 low to be a breakout rally is questionable.

We could be wrong.  If the S&P 500 trades steadily above 5338, then all bets are off.  The breakout is valid.  The S&P 500 5338 target is based on Elliot wave calculation.  During a corrective wave, the market can create a minor higher high such as 5338 vs. the old high at 5264.  If the S&P 500 fails around 5338 and then trades below its 50-day moving average,then the vicious wave C will take out the April 19 low and more.

Nvidia will report earnings next Wednesday May 22 after market close.  Reaction from Nvidia earnings report will determine the validity of this rally.

We are of the opinion that the market is currently at late stage and the economy and stock market both are doing well.  Nothing is fundamentally wrong.  Consumers are slowing  down a little bit, but not in crisis.  We are honestly waiting for the market to have a flush to reset the cycle count.  Due to the strength of the economy, it has been a long wait.

We are mostly invested.  Occasionally we sell covered calls to generate cash.   We wouldn’t deploy new cash at the current level though.

Below is the S&P 500 daily chart. Watch for resistance at 5338 after Nvidia earnings report.