What the charts say about whether the S&P 500 can continue higher into year-end

The S & P 500 continues to make new highs, and volatility continues to decline. That’s typically a recipe for success. The question, of course, is whether the market’s advance can continue with earnings season heating up over the next two weeks and with both the presidential election and the next Fed meeting both happening in the first week of November. If there’s going to be a bump in the suddenly smooth road, logic suggests it’s going to happen soon. Indeed, the market will do whatever it wants, which sometimes is the complete opposite of logical. With that in mind, here are a few things that have caught our attention recently that investors should be mindful of in the coming weeks: Low two-way volatility First, two-way volatility has plummeted. We can see this a few different ways. First, the S & P 500 has logged just two absolute 1% moves since Sept. 19, which is nearly a month’s worth of trading. For some context, in August, there were TEN, which was the most in a calendar month since March’23. Low two-way volatility leads to bullish chart formations and clean breakouts. No long winning or losing streaks Secondly, the S & P 500 hasn’t logged more than two straight gains since seven in a row from Sept. 9 to Sept. 17. That may sound discouraging, but the S & P 500 hasn’t logged any consecutive declines since the four straight losses from Sept. 3 to Sept. 6. The absence of follow through on both sides shows a lack of conviction. Again, with so many micro and macro data points and events on the docket, we can understand why. A lot of new 52-week highs Despite the apparent back and forth movement, many indices and stocks have been edging higher the last few weeks. In fact, 114 S & P 500 stocks made new 52-week highs on Tuesday, which was the first time we’ve had over 100 since 7/16/24. Yes, the SPX last made a new high on that day, and the summer swoon soon took hold. Tuesday’s total also was the second highest of the entire run since last October, only slightly behind the 118 from March 21. A quick glimpse of all the 100-new high days shows that while the S & P 500’s long-term uptrend has persisted, buying right after a 100-new-high session has not yielded immediate upside. Bearish Engulfing Pattern Tuesday’s high number of new 52-week highs was immediately followed by a negative reversal session, and the S & P 500 finished on its intra-day lows. With the day’s opening and close both being higher and lower than the prior session’s, this created a bearish engulfing pattern. This is the seventh bearish engulfing pattern since last December. All but one of them happened near a key trading high – the outlier was the August 2nd huge reversal. Four of the last six occurrences led to further near-term weakness (April, July and twice in August). In December and May, the bearish engulfing patterns didn’t result in much selling, but the market did pause over the short term before the bid returned. Ultimately, the bid came back each time. But buying immediately after a bearish engulfing pattern has not been the best strategy, at least since last December. Waiting for the ensuing digestion phase to come and go has been a better course of action. Successful Bullish Chart Patterns While the market may be short-term extended now, it’s important to know that bullish patterns continue to work – which is the first and last factor we always consider. Think about this: While the intense summer volatility was difficult to sit through, all of it was necessary for the next set of bullish formations to take shape. We follow these across various time frames at CappThesis, which provides a very good understanding of the market’s state. Focusing on the weekly chart, it’s clear that bullish patterns have been successful ever since the market bottomed in 2022. Thus, if the uptrend is going to continue, we’ll need chart formations to continue to resolve higher. That’s obvious, but it’s exactly what did not happen in the 2022 bear market. The bottom line is that the S & P 500 and dozens of its holdings have built up substantial cushions by strongly coming back from the August lows. The hope is that this will help the market withstand the prospective volatility over the next few weeks. 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 . 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