Why the Market Could “Explode” at Any Second

Over the last few weeks, volatility has made short-term trading extremely difficult. The market chopped around for almost the entire month of August, shifting wildly at a moment’s notice. Yield curve inversions, trade war drama, and economic indicators ran stocks ragged as investors attempted to make sense of it all.

Was the selling over? Would the market recover?

Or was this all just a prelude to the next leg of the correction? All it takes these days is a poorly timed Trump tweet to send equities spinning.

Conversely, the market could just as easily erupt in value, driven upwards by newly found trade war optimism.

That’s what happened on Thursday after China said they were ready and able to discuss a new trade deal with the U.S. – something the Trump administration has yet to release a statement on.

And as of this morning, bulls continue to “buy the news”. Yesterday’s momentum carried over and the major indexes are now nearing what could be a huge milestone for the year.

Because in addition to the market closing out August on a positive note, prices might punch through to an upside breakout.

One that could potentially lead to a rally of historic proportions.

Now, I know what you’re thinking. The S&P 500, as charted above, does not look ready for a burst to the upside. Stochastics are high, suggesting that the index might actually be overbought, and prices haven’t surpassed any significant resistance level. Absolutely nothing about this “setup” looks like one of my typical entry scenarios.

And that’s completely true. If this were an ordinary stock, I would stay far, far away from it.

However, this isn’t just a stock, it’s one of the three major indexes. If you’re an investor, you look to these indexes for guidance on the state of the general market.

And based upon what the S&P is showing us this morning, it could be headed for a massive rally. But only if key resistance at 2943.30 can be surpassed – something that doesn’t look likely for today.

The current trading session got off to a good start, but a lower than expected Consumer Sentiment Index (released this morning) cast a pall on what could’ve been a highly productive day.

That’s okay, though. So long as the indexes can stay within striking distance of that price level, a breakout still seems likely.

Especially with earnings coming in the not too distant future. Early corporate revenues have impressed, and if that trend continues, a further surge to the top could easily be in the cards.

Along with a return to the market’s bullish ways, marked by lower volatility and rising prices.

All while opportunistic traders (who saw it coming ahead of time) pocket some rapid-fire, windfall gains.


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