In a previous Blog (see "Previous Blog" below), we showed "The Gap" that the market (S&P 500) would have to go through to reach new highs. In the graph immediately below, we can see that the SPY did just that in short order this week as it broke out of "The Gap" to the upside today. Now, the SP 500 is only about 1.5% from its all time high. Read on...
I think the big question now is "where will the market go from here in the short-term if it moves into new all time high territory?" Usually when markets approach new highs from a big distance below, they "stall" and test above and below the old new high for several weeks. Even considering the above, at this time, there is nothing to stand in the way of the market plowing through at the rate that it has been going.
As we all must know by now, almost all of the recent upside movement in the market has come from less than 10% of the total stocks in the SPY and QQQ. And, a large portion of these has come from the FAANG stocks, Microsoft, and a few more (FB, AAPL, AMZN, NVDA, NFLX, GOOG, MSFT, and a handful more). Of course, these stocks are now way overbought, and any disturbance here now could start a major sell-off and correction.
And remember, quantitative models classify markets as Up or Down by its movements, momentum, trends, etc and they DO
NOT need to know (or analyze) why. Quantitative models predict market directions from market movements, applied mathematics, predictive analytics, artificial intelligence, etc (and not solely from earnings, debt, PE ratios, etc).
MIPS is most valuable in markets like this by keeping us Long while the market is still going up, and getting us into Cash (or Short) if and when the market is falling.
Good trading...
Paul Distefano, PhD
Founder / Lead Developer
MIPS Timing Systems, LLC
Houston
408-234-8348
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