It has been 86 trading days since the December 2018 low. The S&P 500 index rallied a total of 25.89% from low to high. The high occurred on Wednesday May 1st after the Fed meeting conference. After the initial 1.8% drop on Thursday, it rallied back on Friday based on good employment numbers.
It has been 74 trading days since the December 2018 bottom. The sheer amount of bullishness in the market is unrelenting, even the speculative asset Bitcoin rose over 30% in the last few weeks. It seems like the investors are rotating into any asset classes that have been left behind the rally.
The relentless market has surprised a lot of people on the upside. The December selloff was painful, the rise out of the low has been equally painful. It has caught a lot of professional speculators such as the hedge funds unprepared. Normally the market bases for a period of time around the low, seldom it pivots so quickly that produces a V-shaped bottom.
Indeed we have a V-shaped low and it is racing to take out the October 2018 high. The October 2018 high is a 4-year cycle high, once this high is taken out, the previous 4-year cycle low is confirmed and the new 4-year cycle low to high rising phase will last at least until November 2020. As we blogged before, we are currently in the middle of a 17-year cycle that is similar to the period of 1982-2000. This December 2018 low is a 4-year cycle (February 2016-December 2018) low and a half cycle low of the 17-year cycle (2009-2026). We have steadfastly maintained a long term bullish outlook. We have been looking very hard for entry points to deploy fresh capital for investment opportunities. The indices continue to blow out resistance levels and now are marching for the old high.
It is 14 weeks into the current weekly cycle and it is very close to the old October 2018 high. We still maintain the stance that the market is not going to breakout from here and enter a point of no return zone. It will encounter resistance at the old high and enter a correction to reach below for the 200-day moving average. Back in October 1998, it made a 22.45% correction in 11 weeks to produce a 4-year cycle low, then it only took 7 weeks to take out the old July 1998 high, which was a 4-year cycle high then. The October 1998 4-year cycle low was confirmed in 7 weeks. It then entered a point of no return zone to create the dotcom bubble. This time it has spent 14 weeks already and it still hasn’t taken out the October 2018 high yet, and we are not foreseeing a dotcom bubble in the next two years, therefore this December 2018 low is very similar to the March 2009 and February 2016 lows. It will experience a correction to provide entry points.
We have identified a few growth oriented investing ideas that are still in the early investing cycle. We have conviction in these three companies that will be disruptive forces in the coming 4-year cycle.
We blogged that the Fed top is here in our last post. However, the selling pressure was abated last week. The sellers were nowhere to be found. The indices closed positive last week to finish a great first quarter. With the muted price action from last week, is the market set up to launch to new heights or something else?
On Wednesday March 20th,the Fed announced the most dovish monetary policy with clarity. The market participants cheered on Thursday that S&P 500 and Nasdaq both made new highs. Unfortunately, the worries of the global slowdown took control of the market on Friday, it completely reversed Thursday’s price action.
