Need to Know: These charts tell us the bull market has a couple of years left to run

We’re at the start of earnings season, a trade deal is in flux and the economy continues to send mixed signals. But we just got a Brexit deal and Wall Street looks ready to celebrate too.

Our combined chart and call of the day delves into the debate about whether we’ve reached the end of the bull run for stocks or if more big gains are possible. It comes from the founder and chief executive officer of Ciovacco Capital Management, Chris Ciovacco, who sees the latter scenario unfolding if some stars align.

In a See It Market blog post, Ciovacco looks at historical charts to gauge the current market. He points to three periods that saw major trend reversals — a change in price direction — that wiped around 50% off the S&P from peak to trough. Those were 1973-74, 1999-01 and 2007-2008, and the charts all look similar. Here’s one:

But those charts look nothing like the S&P right now:

It looks more similar to these:

In the above two charts, the S&P consolidated — basically stuck to a range — then broke out and resumed a bullish trend, two years of gains in those cases, he said.

“The market is setup to break out. It needs one more piece of the puzzle —return of animal spirits,” Ciovacco told MarketWatch in follow-up comments. As for those spirits, he’s referring to the stock buying that can be spurred when investor uncertainty is replaced by confidence.

“Three drags have been trade, economic weakness and Brexit,” he adds, noting that China trade progress is the most important factor in determining upside or downside. As for the former, he says ”if the market believes China is moving in right direction with a long-term path forward… that could do it.”

President Donald Trump delaying planned December tariffs on China would be a good start, he said.

The market

A Brexit deal definitely is triggering some upbeat spirits. The Dow

DJIA, 0.09%

 , S&P

SPX, 0.28%

and Nasdaq

COMP, 0.40%

are all up nicely in early trades, along with the pound

GBPUSD, -0.2017%

and Europe stocks

SXXP, -0.10%

 .

Read: Brexit pact faces steep odds in the U.K. Parliament — and Johnson might not mind failure

The tweet
The economy

Weekly jobless claims, housing starts — the number of new homes on which construction has begun — the Philly Fed index and industrial production are ahead.

The buzz
Stranger competition

Netflix

NFLX, 2.47%

shares are up after the video-streamer beat forecasts for new paying customers, though it sees a slowdown ahead. And it may finally be facing up to looming Disney

DIS, 1.15%

and Apple

AAPL, 0.39%

competition.

IBM

IBM, -5.52%

shares are down on disappointing revenue from the tech giant.

Results are rolling in from Morgan Stanley

MS, 1.52%

, Honeywell

HON, 2.38%

and Philip Morris

PM, 0.95%.

Shares of cannabis company Cronos

CRON, 5.48%

are mysteriously soaring.

Luxury group Christian Dior

CDI, -1.30%

adds to the growing list of companies apologizing to China.

House Speaker Nancy Pelosi accused Trump of having a “meltdown” in a frosty meeting about Syria. He fired back and it turned into a Twitter thing.

Read: Rep. Elijah Cummings, chairman of key House committee, has died

The stat

$15 million — That’s how much Apple reportedly spent per episode for drama series “The Morning Show,” says the Hollywood Reporter. Apple didn’t participate in that article.

Random reads

Actress Jennifer Aniston on that Instagram photo and why social media makes us crazy

Nearly 1 million U.S. kids could lose free lunches over a White House proposal

After more than 80 years, this iconic U.S. magazine is shutting down

Redditors on the truths some need to hear, but few will tell

Need to Know starts early and is updated until the opening bell, but sign up here to get it delivered once to your email box. Be sure to check the Need to Know item. The emailed version will be sent out at about 7:30 a.m. Eastern.

Follow MarketWatch on Twitter, Instagram, Facebook.

What's your reaction?
Happy0
Lol0
Wow0
Wtf0
Sad0
Angry0
Rip0
Leave a Comment