The S&P 500 exits technical bear market

The S&P 500 has recently exited its technical bear market, but what does that mean for us in the immediate future? Contrary to popular belief, the stats exiting a bear market don’t provide a strong correlation or a reliable indicator of what’s to come. It’s important not to rely solely on this signal for short-term predictions.

Focus on earnings growth and a healthy economy

Instead of relying on bear market exits, it’s more beneficial to pay attention to earnings growth and the overall health of the economy. Over time, equity prices tend to follow earnings growth, indicating that a healthy economy is crucial for upward momentum in the stock market.

Bullish sentiment and extreme greed signal

Currently, we are observing bullish sentiment reaching a 52-week high. This is a contrarian indicator suggesting that the market may have moved too far in one direction. The last time we saw a 52-week high was on February 8th, which was followed by a market pullback. Additionally, the fear and greed index continues to register an extreme greed signal, further highlighting the optimistic sentiment prevailing in the market.

A crucial week ahead with CPI and FED

Looking ahead, next week is anticipated to be a significant news week for the stock market, potentially one of the most critical in the coming months. Two key events to watch are the release of the Consumer Price Index (CPI) data and the Federal Reserve (FED) meeting, which can have a substantial impact on market dynamics.