Stock Market Update
The S&P 500 Is Back At All-Time Highs
Buy The Dip Or Short The Rally?
A great stock market rally just played out before our eyes. I saw the dip coming, but I wouldn’t say I saw the rally coming.
At this point we’re all forced to make a decision as the market is begging the question: do I trade with the trend, or do I “sell in May and walk away” as the S&P has just set a new all-time high in April?
That is what’s been on my mind heading into the monthly close and here’s why.
SPY — Monthly Chart
Donald Trump’s appointed replacement for the Federal Reserve Chairman (currently Jerome Powell) is expected to be confirmed by the Senate this week.
Republicans hold a 53 to 47 majority in the Senate, so this should go smoothly for Trump and I expect the market to move another leg up as a result of that outcome, especially if Powell’s last move is to cut the interest rates heading into the transition of power.
This appears to be a “perfect storm” of sorts for the stock market which has been moving up rapidly since the 1-month anniversary of the Iran conflict (rising 13% in the past 21 trading days).
Things To Keep In Mind
There is an FOMC Meeting this week which started yesterday (Jerome Powell’s last one)
The interest rate decision will be Wednesday, April 29th and is expected to feature a rate cut if there is a change announced
Bitcoin is still in a bear market (down more than 35% from all-time highs with the altcoin market in shambles) despite the stock market, oil prices, and precious metals thriving throughout the same period
I’m still dollar-cost averaging any projects of interest despite a back-of-my-mind suspicion that the crypto market may not recover significantly until Q4 2026
If you’re trying to catch a sale on the S&P 500 at this time, then I wouldn’t expect anything lower than $690 (that’s the 8 EMA on the weekly chart) assuming something unusual happens leading to a pullback of a few percentage points
Based on how things usually go, the upper $690s are likely to hold and $700 would be a fortunate buy IF wicks reached down that low
As For Later In May
I’m cautiously bullish right now. I will be delivering further updates as May unfolds; but, if I had to make a prediction I’d say there is a 55% chance that all the upside headlines I’ve mentioned above are necessary to produce the “sell in May” bull trap.
The S&P’s daily chart is crossing back and forth in and out of overbought levels. The monthly chart is currently overbought following the immediate buyback from the start of the conflict with Iran, and it will only take one or two irrational weeks of upward movement to bring the weekly chart into overbought levels as well. Another (perhaps routine but fairly scary) pullback is probably right around the corner.
Until then, it’ll be business as usual for me — a mix of short and medium term trades that work for small to medium budgets will be shared with my members.