What's Next For Stocks After All Time Highs?

The stock market reached a new all-time high on Friday, as the S&P 500 (SPX) settled 34 points higher at 2459, a rise of 1.4% for the week. This happened after the market dipped to 2412 on Tuesday, after a tweet from Donald Trump Jr related to a meeting with a Russian lawyer.

On Wednesday and Thursday, Fed Chair Janet Yellen delivered, what used to be called, the semi-annual Humphrey-Hawkins testimony before Congress. Investors interpreted her comments as dovish, and thus, the Fed would remain in their eight-year extremely accommodative state; hence, good for the stock prices. This led to the move higher through week’s end. Even on Friday, while bank stocks sold off after their earnings reports, the market continued its move higher.

The coming week will certainly see a lot of individual stock activity, as the earnings season continues to gear up. This will include reports from numerous companies, including from Netflix, on Monday, other tech stocks such as Microsoft, and more financials including Bank of America.

Having made its move to the upside, we expect the SPX to fail between the 2460-2470 Fibonacci extensions. See the thick blue lines of the accompanying chart. We expect a move to the downside for the remainder of the week, as the SPX enters into a brief corrective period and completes its current short-term cycle. For the near term- we expect choppy action just below this resistance area. These market cycles are represented by the cycle brackets, the dotted semi-circles at the bottom of the chart.

Even with the move to all-time highs, the SPX’s current intermediate market cycle is due to exert increasing downward pressure through the end of august or early September. We deem the period just ahead as one of “Extreme Risk” for the stock market.

Watch the askSlim Market Week for more a more detailed look at my short-term view on the SPX for the coming week.