"I believe in analysis and not forecasting."
-Nicolas Darvas, How I Made $2,000,000 in the Stock Market
Trying to forecast what will happen with the economy or stock market is a fool’s game. No one knows what’s going to happen.
The Federal Reserve board of governors is made up of some of the smartest economists in the country. And even they don’t get it right.
They said inflation would be transitory… it wasn’t.
They said they would cut interest rates 6 times this year… they didn’t.
They said that millions of jobs would be created… they weren’t.
The Federal Reserve finally cut interest rates by 0.50% on Wednesday. This long-awaited rate cut was the first since 2020.
Had you waited until now to get involved in stocks, you would have missed an 89% rally in the Nasdaq over the last two years.
Buying and selling based on the economic outlook is a good way to lose money. You will get in at the top and out at the bottom.
Our job as traders is not to predict. It is not to forecast. Our job is to analyze.
So, let’s review the technical outlook of the S&P 500 index…
Above is a daily chart of the S&P 500 ETF, SPY. You can click on the chart to view the full-sized version on TradingView.
I have highlighted several key support levels. There is no resistance since we are currently trading at all-time highs.
The 460 level from last July and December is the long-term support level. It is a full 20% below the current price, but if we saw some sort of catastrophic Black Swan event, that is where I would be buying.
The medium-term support level is at 510. This would represent a 10% drop to the 200-day moving average – another key support level. As long as we are above here, I am bullish and want to be 100% long.
Near term, I am watching the 540 level. After running up against previous highs in August, the market pulled back and found buyers here. This level, just beneath the 50-day moving average, is what I am watching to ensure the short-term uptrend remains intact.
Right now, the technical picture is very bullish. Here is the price action over the last six months…
Other than the Japanese Yen shock at the end of July, trading has been very constructive.
Following a tightening wedge that concluded the summer rally, profit-taking formed a series of shallowing pullbacks against the all-time highs.
After last week’s upside reversal following the CPI report and Wednesday’s 50 basis point rate cut by the Fed, the market broke out into new high ground on heavy trading volume.
The bull market is in full effect, and I expect to see higher prices leading into the November election.
Best wishes for your trading,
The Traders Agency Team
