Let’s look at what the the S & P 500’s first half taught us about the chances for more gains in the second half. The S & P 500 just logged its third straight quarterly advance and its sixth in the last seven. The last longer quarterly win streak was seven in a row from Q2 2020 through Q4 2021. That was quite a run, but not compared to the late 90s . From Q1 1995 through Q2 1998, the S & P 500 was up 14 straight quarters. This shows, once again, how trends can extend longer (sometimes much longer) than we think they can. That was a unique time, but many astute market observers believe the current Technology surge is a lot like the late-90s. However, there’s a lot of disagreement about what stage we’re in. Some think we’re in the early innings, while others think we’re closer to the end than the beginning. Four key factors The point is that we can believe whatever we want, but the market will tell us if we’re right or wrong. And we better pay attention to it. Fortunately for us, the price action eventually morphs into recognizable trends and patterns on the charts. And through the first half of 2024, that has kept us on the side of the uptrend. Below are four important factors we’re continuing to watch closely into the year’s second half. 1. Successful Bullish Patterns We heard a lot about the strong gains in the S & P 500’s first six months over the last few days, but here’s the scorecard we care most about: Number of successful chart patterns: Bullish: seven Bearish: zero This chart goes back to November ’23, however, five of the S & P 500’s seven upside targets have been acquired in 2024. The index’s technical complexion won’t look any different until bullish patterns stop working and bearish patterns actually start to play out. 2. Rotation We know that the biggest stocks have been responsible for a lot of the S & P 500’s move YTD, but a total of 292 S & P 500 stocks are up YTD (58% of the index). 116 of them are up more than the S & P 500 (+14.8%) through July 1 st , 2024. Also, some of the best breadth days in 2024 have come on trading sessions in which technology lagged. Specifically, since the start of the second quarter, technology has been the index’s worst sector 10 times; during those days, the S & P 500 had positive breadth seven times (70% win-rate). So, while we need tech to be among the leaders in order for the S & P 500 to keep advancing given the sector’s whopping 32% weighting, during the periods in which tech l ags , the other sectors need to continue to step up. 3. Low two-way volatility This +/-1% move table says it all. We’ve had 15 1% gains and just SEVEN 1% losses through the first six months. This tells us that two-way volatility has been very low, which has been a big reason why the aforementioned bullish patterns have continued to work. For some context: In the first half of 2023, the index had 26 1% gains and 16 1% losses. In the first half of 2022, it had a massive 30 1% gains and 37 1% losses. Without knowing anything else, we could have surmised how those years went. 4. Good closes The S & P 500 has closed above its intra-day mid-point 77/125 trading days through Monday. That’s a 62% win-rate . This isn’t extreme, but it includes the 3/1 through 4/19 period when the S & P 500 closed above its mid-point just 41% of the time. Since then, the index has closed above its mid-point nearly 70% of the time again. This short-term phenomenon is where it all starts. If the biggest institutions are bullish, they’ll continue buying throughout the trading day even as prices go higher. This results in strong closes. When that continues to happen, it creates an uptrend. There are other factors that helped get us here, but those are four of the most important from a technical viewpoint. And if they continue to work, the second half could look a lot like the first. -Frank Cappelleri Founder: https://cappthesis.com DISCLOSURES: (None) All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, NBC UNIVERSAL, their parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL’S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.
