Jim Cramer: How Long Can Bull Last?
This latest bull run has been spectacular, but how long can the market keep it up?
"How much longer can we go higher before the gravitational pull of stocks inevitably takes us right back down?" asked Jim Cramer on Tuesday's broadcast.
As the S&P marches higher, there's growing chatter that suggests the S&P may be nearing a level of strong resistance. That's because the S&P is rapidly approaching levels where it peaked in 2000 and again in 2007.
"As a result, they say it's time to get cautious or even start betting against stocks based on the pattern," explained Jim Cramer.
Although bears can certainly make the case to sell due to the so-called double top, it's also entirely possible that the charts are signaling a long march higher. That is, there are patterns forming which suggest the market may be about to break out of a range in which it's been trapped for 10 years.
"That's the idea I want to entertain," said Cramer, "using the analysis provided by Scott Redler the chief strategic officer at T3 Trading."
To understand Redler's long-term optimism, Cramer said it's valuable to first take a step back.
For the past decade the market has been miserable, suffering through fits and starts triggered by the dot com collapse, the housing bust and the financial crisis.
However, that wasn't always the case.
Looking at the chart of the S&P 500 from 1976 you can see how the market roared in the '80s up 250% and then surged in the '90s up 360%.
"We had two straight decades where stocks were simply fabulous investments, and the whole market was practically unstoppable," Cramer explained. "Redler's not saying we're going to repeat those incredible moves, but he is pointing out that it's not unprecedented for the averages to have massive multi-year rallies, and that just because we go up, that doesn't mean we have to go back down."
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Here's why Redler thinks the path of least resistance could be higher.
Looking at a chart of the S&P 500 from May, Redler has identified a pattern that he interprets as very bullish. Specifically, the S&P has been making a series of higher lows.
For example, the November low was higher than the June low, and the December low was higher than the November one.
That's a very bullish sign for chartists because it indicates a powerful positive trend.
Also, the S&P broke out above a strong ceiling of resistance at 1474, and is now trading above the psychologically key level of 1500.
All told, the patterns feel bullish to Redler.
It's worth noting that Redler concedes the first time the S&P challenges the 1540 to 1565, the level where it peaked in the past, there could be resistance. However, long-term he thinks the level will be challenged again until it's pierced.
And if we get a close above the so-called double top, then Redler thinks the S&P's next stop will be 1700, and perhaps beyond.
Cramer finds the analysis intriguing and potentially prescient.
"I like this market, and Redler's chart work gives us one more reason to believe this move is far from over, with the S&P 500 potentially headed to new all-time highs and beyond," he said.
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