Weekly Chart Review

S&P 500 and NASDAQ at New All-Time High's...How High Can They Go?

Long-time readers know that I am a big believer in cycles as we live in a world full of cycles. From planetary cycles to geological cycles to biological cycles, we are surrounded by cycles. It’s no wonder then that the things we create (i.e., businesses, markets, economies, etc.) adhere to cyclical patterns as well.

The hard part about economic cycles is that the start and end are not as easily defined. For instance, I can open an app on my phone right now and tell you exactly when the sun will set this evening and when the sun will rise tomorrow. Economic cycles cannot be defined with similar precision but that doesn’t mean they don’t exist.

Instead, we have to look for patterns and discern where we are in the cycle to have a better idea of where we are heading next.

There are many ways to do this and there’s a lot of great work that has been done on the study of cycles. When it comes to investing, I like to focus on the “Average Investor’s Allocation to Equities” because a) it relates directly to investing and b) it is the best predictor of stock market returns that I have found.

I do a deep dive on this topic each quarter but that is not the focus of this piece.

Instead, I’d like to spend this week’s newsletter focusing on the “cycle within the cycle” and with that, I am going to provide some very specific targets for the S&P 500 and the NASDAQ should we see this recent rally continue.

Let’s dive in.