We’re at the start of earnings season, a trade deal is in flux and the economy continues to send mixed signals. But we just got a Brexit deal and Wall Street looks ready to celebrate too.
Our combined chart and call of the day delves into the debate about whether we’ve reached the end of the bull run for stocks or if more big gains are possible. It comes from the founder and chief executive officer of Ciovacco Capital Management, Chris Ciovacco, who sees the latter scenario unfolding if some stars align.
In a See It Market blog post, Ciovacco looks at historical charts to gauge the current market. He points to three periods that saw major trend reversals — a change in price direction — that wiped around 50% off the S&P from peak to trough. Those were 1973-74, 1999-01 and 2007-2008, and the charts all look similar. Here’s one:
But those charts look nothing like the S&P right now:
It looks more similar to these:
In the above two charts, the S&P consolidated — basically stuck to a range — then broke out and resumed a bullish trend, two years of gains in those cases, he said.
“The market is setup to break out. It needs one more piece of the puzzle —return of animal spirits,” Ciovacco told MarketWatch in follow-up comments. As for those spirits, he’s referring to the stock buying that can be spurred when investor uncertainty is replaced by confidence.
“Three drags have been trade, economic weakness and Brexit,” he adds, noting that China trade progress is the most important factor in determining upside or downside. As for the former, he says ”if the market believes China is moving in right direction with a long-term path forward… that could do it.”
President Donald Trump delaying planned December tariffs on China would be a good start, he said.
A Brexit deal definitely is triggering some upbeat spirits. The DowDJIA, +0.29% , S&PSPX, +0.44%and NasdaqCOMP, +0.40%are all up nicely in early trades, along with the poundGBPUSD, +0.2417% and Europe stocks SXXP, +0.20% .
Weekly jobless claims, housing starts — the number of new homes on which construction has begun — the Philly Fed index and industrial production are ahead.
NetflixNFLX, +1.72%shares are up after the video-streamer beat forecasts for new paying customers, though it sees a slowdown ahead. And it may finally be facing up to looming Disney DIS, +1.31%and AppleAAPL, +0.39%competition.
IBMIBM, -6.07%shares are down on disappointing revenue from the tech giant.
Results are rolling in from Morgan StanleyMS, +3.24% , HoneywellHON, +2.48%and Philip MorrisPM, -0.48%.
Shares of cannabis company CronosCRON, +2.74%are mysteriously soaring.
Luxury group Christian DiorCDI, -0.85%adds to the growing list of companies apologizing to China.
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