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Market uptrend continues with hope of a debt ceiling resolution.

Market uptrend continues with hope of a debt ceiling resolution.

May 23, 2023

The stock market had a strong week as earnings season receded and hopes of a debt ceiling resolution increased. The S&P 500 touched a key resistance level that could portend good things to come.

A couple of weeks ago the Nasdaq pushed though a resistance level at 12,270 which led the way for the broader market to follow suit. Last week the S&P rose above 4200 for the first time since last August and has shown that the uptrend which started in October is still intact. The next upward test for the S&P is at 4325 and it’s a big one. I believe 4325 is an important tipping point at which investor sentiment will begin to turn significantly more positive and will drive the market back to it’s previous highs at 4818. This process will take time, but I believe the S&P can regain it's previous high by the end of the year.

The alternative scenario in which the stock market fails to breach 4325 and drops to lower lows is still a possibility but the probability drops every day. Professional investors know that bear markets only last for so long and inherently the stock market wants to rise. These investors only want to stay defensive for a limited amount of time before switching back to buying stocks for fear of missing out on the next rally.

I always encourage clients to buy aggressively during market lows, as I did during July to October of last year, however I understand that buying stocks during lows can be psychologically too scary for some investors. Buying stock as the market rises and after it confirms an upward trend is another good place to invest, and I continue to see the current market as a good buying opportunity to invest excess cash and build your portfolio.

Photograph by: Bruno Nascimento on Unsplash

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