(Editor's Note: Paul Schatz, President of Heritage Capital, LLC, in Woodbridge, will be contributing to Fi$callyFit every Friday. Read his biography here)
I am going to spend my time this week staying with the theme from the past few weeks, my bullish forecast for the stock market.
Although this phrase always applies, it’s certainly been an interesting few weeks, especially on the geopolitical front with the debt crisis deadline looming, Greece, Ireland, Spain and Italy along with the plethora of poor economic reports.
Yet with all this being shoved down our throats 24/7 by the media, the major stock market indices are one or two strong days away from multi year highs. It’s been the epitome of resilient.
But to be fair, if I was going to be wrong, I laid the case out last week from a technical perspective.
The chart above from last week has been updated and remains an open possible scenario for the bears if the S&P 500 is able to close a few days below the neckline. Given the strength this week, it would be a long drop just to get to the line in the sand, let along pierce it. If and when the S&P 500 closes above the area labeled “right shoulder”, the head and shoulder pattern for the bears will be null and void, something I continue to believe will occur this quarter.
On the fundamental front, something I am certainly no expert in, S&P 500 earnings are growing faster than the S&P 500 index. That means the market is getting cheaper even though it is still rising. We are actually seeing price/earnings multiple compression rather than the usual expansion. It is highly unusual for a bear market to begin with so many positives at a market peak.
Looking out even further gives you a sense of how much upside room there is before all-time highs can be seen. In case you forgot, the Dotcom bubble high from 2000 is another 100% from here. I remember quipping on Bloomberg TV that whatever high the NASDAQ was putting in wouldn’t be seen again in my lifetime. I certainly hope I live a very long life and will be able to see that peak eclipsed sometime in the 2020s or 2030s.
Last week I closed with: