Stocks had a mini-blip last week, with the S&P 500 dropping nearly 1.5%. While September is nearly flat after a stronger than expected August, fundamentals like valuation have some strategists concerned. Looking at the charts, the technicals may be signaling a slowdown ahead as well. Greg Harmon of Dragonfly Capital is seeing a pattern emerging, but it’s not all bad.
“Price is truth, 2,000 shouldn’t matter psychologically, [but] it does seem like it does matter,” he says in the attached video. “When I look at the short-term chart of the S&P 500 I see that the 100-day moving average which some technicians use has been support, and that’s at about 1960 on the S&P, there’s some support underneath that at 1940 and 1930, if we get below that then those guys who are looking for a 10% or more may be right this time.”
But after a mini-pullback, Harmon does see a big move in the cards – basically to 2,390 in the S&P. While Harmon sees the market dipping a bit, and most likely treading water for the next months, he sees the long term target of 2390 sometime by the end of next year.
“When I look at a long term chart of the S&P 500, it’s been trading in what technicians call an ‘expanding wedge pattern,’ the lower lows but then flat highs and the market broke out above 1560, triggering that target of 2390. We’re right about halfway now, halfway is a typical point for the market to stall and just rest for a while.”
A 20% move by the end of next year to the upside seems pretty robust, but in this bull market anything seems possible.
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