In the stock market, the very first thing you should always look at is how the overall market is performing, and where it’s likely to go next.
If you get that part right, then everything becomes easier and most everything else you do has a better chance for success.
Here is the state of the market right now…
Last week, the market hit new highs as it reached up to 2031.92.
But is that enough to say that the bull is alive and well after such a violent drop off from September into October?
That’s yet to be seen, but a there are a few things that will determine the future of the stock market.
Let’s start by looking at the S&P 500 (SPX), which is the benchmark index for the overall market, thanks to Stockcharts.com:
Here you can easily see how the market bounced right back up after that fall ending in the middle of October…
So now we can turn our attention to the two lines I’ve drawn.
The trend line shows us where the ceiling for the SPX could be if it stays consistent in the very near future.
And the support line shows us that the previous highs topped out at around the 2010 mark.
That’s the line the market needs to stay above if we want to consider this bull to be raging. And if it breaks out above the trend line, that will be a significant indication of strength.
However, if the market falls below that support line, we can say that the bull isn’t sprinting up the stairs at the moment. Instead, it would either be continuing its period of transition, or simply losing some steam.
For now, the SPX is back up well above its moving averages (the curvy blue and red lines), so it’s healthy at the moment.
But a peak back at a month ago shows us just how quickly that can change with a strong downswing.
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