I had previously posted two important charts I was keeping an eye on here and here for continued strength in the equity markets. They have both followed through now, and point to further upside in equities.
First, we have stocks breaking out relative to bonds. This is huge. We are above the 2007 highs and equities should be overweighted.
Next, we have Sotheby’s now breaking out above the downtrend line. I wrote about the correlation between this luxury auction houses’ stock to the market. If BID continues higher, this is another huge positive.
Here are two other interesting observations I see out there. First, the S&P500 and then the Dow Industrial ripping right through the 161.8% extension of the 2007-2008 decline. For the S&P500, this number stopped the rally in 2015, now we are above it.
Are we a little extended here? Sure, but overbought is good from what I see. Pullbacks should be bought. You never know if this rip won’t allow everyone the perfect backtest entries.
The 261.8% extensions are 3,048 and 26,689 respectively. Do I think we get there? Those targets are a little stretched, but I would say its not out of the picture if sentiment and fund flows continue to shift to equities. We may just see a monsterous rally/bubble chase higher.
S&P 2,300 and 20,000 are defintely coming. In my opinion, we are beginning a new bull market.
Have a good weekend!