A couple months ago, I told you to keep an eye on two stock market numbers: 2,786 and 2,581 in the S&P 500. Those are the highest and lowest levels of the benchmark index since early February. For months, the S&P had stayed within those confines despite several flirtations with both numbers. Now, it appears a true stock market breakout has arrived.
As I write this on Tuesday afternoon, the S&P 500 is at 2,790. If it closes above 2,786, it will have finally broken through five-month resistance. Typically, when a stock breaks above a long-term trading range it leads to a substantial rally. The same usually goes for a fund or an index. But the perception among many analysts, including some of our own here at Cabot Wealth Network, is that this post-correction rally is already on borrowed time.
Zoom out for a second, and you might come away with a different opinion. Here’s a year-to-date chart of the S&P 500:
After a fast start to the year, the index peaked in late January at 2,872—an all-time high. We’re still more than 3% off that peak, despite the recent run-up. While that May-and-June advance may look like a stock market breakout, all it really amounted to was some steady stair-stepping back to the high end of this five-month trading range.
Now that it appears we’re breaking above that range, it’s not unrealistic to expect another push higher—possibly a big one, though one can never quite be sure. The timing of the technical breakout could not be better, either. Second-quarter earnings season is just getting underway, and economists are forecasting 20% earnings per share growth, which would be the second-highest quarterly expansion in quarterly profits in the last eight years.
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So, with stellar earnings potentially adding a few extra logs on the market’s campfire, I’d say a sharp breakout is not only realistic, but likely. Even prior to Tuesday’s break above 2,786, Mike Cintolo—our resident market expert and chief analyst of Cabot Top Ten Trader—hiked his “Market Monitor” with the evidence beginning to improve.
“By our measures,” Mike wrote his Cabot Top Ten Trader subscribers on Monday, “the intermediate-term trend is still tilted up, and while there are fewer stocks hitting new highs than there were a few weeks back, there remain many stocks in good shape.”
Mike tends to be overly cautious, even when times are good (it has worked out quite nicely for him; he’s beaten the market by a boatload during the past 11 years!). So for him to say there are “many stocks in good shape” is a big green light to start buying stocks. If you want some help doing it, I highly recommend subscribing to Cabot Ten Trader, an advisory in which Mike recommends the market’s 10 best momentum stocks on a weekly basis. In doing so, Mike regularly hands his readers gains of 30% to 50% in a matter of two weeks.
To learn more, click here.
If a true stock market breakout has arrived, Mike is the person who can help you fully capitalize on it.
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