One last big S&P 500 meltup likelyYesterday the S&P 500 briefly made a bullish trend line cross before pulling back below the trend line. This is what you might call a "bullish rejection," because it actually got across the trend line before pulling back. Often such rejections portend that a bullish move is coming, but won't happen right away.
Possibly we will see a dip to a support level before making a successful cross with a close above the trend line. I think that's the most likely outcome in the event that Trump refuses to concede and there's unrest or a protracted legal battle. Should Trump concede, I think we could see an immediate bullish trend line cross as the nation breathes a sigh of relief that there won't be rioting.
Typically, the longer you spend at a resistance level, the more likely that the resistance level will be breached. So the fact that we're hovering near the trend line today rather than pulling back from it bodes well technically for getting across the line.
In fundamental terms, I think it likely that there will be one last meltup on news of a new stimulus bill, whenever one materializes. The parties may wait until Senate races are decided, so that they know what their bargaining power is in negotiations. Investors, however, may not wait to start speculating on the stimulus they know is coming. With election uncertainty resolved and Q3 earnings looking pretty good overall, I think the meltup could soon begin in earnest even without any definite stimulus news.
I'd caution that the market is very overvalued here-- less so if you take into account how low interest rates are, but still multiples are at historically high levels and there will likely be a correction at some point in the next couple years, especially due to multiple compression if interest rates begin to return to normal levels. (Large corrections often come in the second year of a president's term, according to election cycle theory.)
