S&P 500: Historical roadmaps when breaking out of a secular trading range

We think that we are in an environment similar to a 1987 correction vs a 1946 market failure. In other words, we believe the market will correct quick and continue the long term secular bull market.

We see ourselves as chart 2 and 3, not chart 1 - which is a market failure when the market hit 19.25 then failed for four years.

 

Chart #1: In 1946 the S&P 500 reached the 1937 top, instead of breaking out it pulled back and coiled underneath for 4 years before the true breakout into a new secular bull in 1950.

 

                          

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

     (Source: Richardson GMP)

 

Chart #2: In 1980 the S&P 500 had a breakout into a new secular bull, clearing above the highs of the range going back to 1968. However after breaking out we saw a move back to retest and for a short while even re-enter the trading range at the 1982 low.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

     (Source: Richardson GMP)

 

Chart #3: The current situation strongly points to something similar to the early 1980’s here.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

     (Source: Richardson GMP)

 

In 2013 the S&P 500 reached the 2000/2007 double top just below 1,600 and clearly there was no 1946-1949 style action.

The market powered through into a new secular bull market.

 

All of our work now points to a 1982 style re-test, which we believe will bring the S&P 500 back to the range of the double top breakout below 1,600.

 

Nothing really abnormal or unexpected at all from a long-term technical perspective.

 

We will exercise patience, and slowly build positions for the next leg up - call if you have any questions.

 

Cheers,

Chris

416-572-5429

 

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