The Big Picture for Equity Markets. Fundamentals And Technical’s: The Old Man Sticks His Neck Out!
Over the weekend I had a discussion with an important European industrialist friend, who asked me about the outlook for the stock market, i.e. what I thought would happen over the next year or so.
My initial reaction was to remind him that the mid-terms were less than 2 months away and much depends on what the result was of these elections. As it he was a friend, I erred on the non-committal.
Whilst I do believe these elections are going to be massively important for what happens over the coming two years, there is so much more happening geo-politically and fiscally, that I needed to add some outlines which are clearly worth mentioning.
The Iranian and Ukrainian wars.
People will have different opinions on what is happening with these countries and why it is happening. But for my part I will deviate from the msm narrative and call it as I see it.
I am no supporter of Putin, but I cannot believe the war in Ukraine came about due to EU and NATO expansionist aims. The overthrow of an elected President during the 2014 Maiden Uprising, when EU senior officials were seen marching in the streets with the protestors, I do not forget.
The amount of western taxpayers’ money being pumped into Ukraine to keep the war going, and the complete lack of action to bring this conflict to a resolution by both the EU and the Biden administration makes absolutely no sense to me. These are people who constantly talk of peace, yet when it comes to the Ukraine, their actions are to throw fire on the conflict rather than try to stop it.
The only person trying to stop this conflict is Trump. His critics in Europe are doing nothing… for me this smells, and no amount of MSM narrative spinning will change my mind.
As for the war with Iran, let’s get this straight! Iran has been at war with the west for almost 50 years, yet because they have used proxies: I.e. various terrorist groups to attack our people and our way of life, our politicians have run away from confronting Iran head on. Indeed, most of the actions we have seen from our yellow politicians has been towards placating Iran through trying to buy them.
The problem here is that the Iranians have used much of this western taxpayer money to persecute their own people, and more importantly, develop a nuclear bomb, which if they succeeded would have stopped any country from attacking them, no matter what they did.
Trump has known this is problem for decades, and it got to the point that unless he attacked Iran, the mad mullahs would have succeeded in owning a bomb, which would be catastrophic for the western world.
I believe Trump was shocked at the lack of support he received from his European and NATO partners, but once he had committed his military, there was no way he could pull back.
It is my opinion, that had Trump received the support he expected, this conflict would be over by now, Oil prices would already be on the decline, and inflation would be much lower. The lack of support has therefore extended this conflict, which means European nations and other NATO members are majorly responsible for the current rise in Oil prices, and the resulting inflation.
Some of you may have a different opinion, but I will not back away from my own views.
In a nutshell, the EU and NATO members are clearly responsible for the continuation of both these costly wars, and whilst our own media outlets may wish to spin a different narrative, their narrative has too many flaws to be trusted.
Why this narrative is being spun, makes very little sense, unless you look at the bigger picture, especially in Europe.
The EU project, whilst the concept may have had its merits originally, is proving to be a complete failure, both socially and economically.
Terrible levels of low growth and high mass immigration, (both legal and illegal), is putting such a strain on European cultures and finances, that the people are now starting to rebel.
The British voted for Brexit, but their politicians have done everything in their power to make this potential advantage into a failure. The British politicians in the established parties have clearly decided they know more than the British people, and this has not gone down well.
Instead of grabbing the opportunity by the scruff of the neck and running with it. The establishment has kept the UK tethered to many EU policies and directives, and as a result, the UK is now on its knees, both socially and economically.
The public is focused on mass immigration and porous borders, and rightly so. But the real problem is increasing debts and lack of productivity. Moreover, the problem is a declining income and an acceleration in government spending. This is the big problem.
Sure, the British public will focus on the effect immigration is having on their towns and villages, their culture and their social services, because those problems they see and understand. However, if they understood more about the economic situation, they would be protesting about that, just as much as they focus on illegal immigration.
Millionaires leaving the UK and taking their businesses with them is a massive problem, its just that most Brit’s are fiscally illiterate.
Sorry, but that is just a fact.
But let’s be honest, the UK is not alone.
Almost every European country is suffering from the same problems as the UK. Open borders and unfettered government spending, along with zero or very little growth is unsustainable. We are in a situation where every European country is in debt, including those countries like German and France, who were supposed to be the drivers of European economic growth.
Germany and France, who have always been the major benefactors of the EU, are rapidly declining, and their people have had enough.
Germany, who sold its soul to the Chinese - kept EU borders open to the Chinese, because they could sell the Chinese machines and technology are now suffering themselves from competition from China. Funding the war in Ukraine, taking in millions of poor non-Europeans with no skills who need to be supported, and losing exports is killing Germany. Again, the people here have had enough, and this is clearly illustrated when we look at the rise of the Nationalist AfD party.
East Germans still remember living under the rule of communist Russia, and they are not happy about changing Russian communist Rule for EU socialist rule, especially when their towns a villages - like in the UK - are being flooded with immigrants whose ideology is at odds with that of working-class Germans.
In France we are in a similar situation, with the Nationalist Party of Marine Le Pen finding massive support.
Make no mistake, With the rise of Farage, Le Pen and the AfD, who are all anti-EU, we have to watch what happens over the next few Years in these countries. And let’s not forget, the Irish, the Spanish, and many other European people, are taking to the streets to protest against their more established politicians, and the rule of the overbearing EU.
I realise for a capital market report, I have focused heavily on current European politics, but you cannot separate the two, when discussing the outlook for global equities.
For the stock markets to continue to rise with need to see broad economic growth and profitability, and not only are we not seeing that today, we are actually seeing developments which will limit growth and company profitability in the foreseeable future.
Europe is a major global consumer, and its decline in purchasing power will affect every market, not just European indices.
And whilst I am taking the layers of this political and economic onion in Europe. Let’s not ignore other EU developments which are coming down the road.
The imposition of Central Bank Digital currencies is well underway in Europe. We are already seeing limits on the use of cash, and this limitation is scheduled to increase of the coming two years or so.
But worse than that - as if anything can be worse than CBDC - the EU has recently announced that due to the vast sums of Private savings in Europe, they intend to take peoples personal savings, as much as 10-trillion Euros worth, and invest it for them!
This is nothing more than government theft!
They took our pension contributions and now call our pensions part of the welfare and benefits cost. When by any metric, our pensions are our personal savings. Money, we gave governments to fund our retirements.
Now they want control what we spend, where we spend it, and - if we do not spend it - they will take it and invest it for us.
Good God, what can go wrong!
The fact is we have been kicking this economic problem down the road for the best part of three decades, and we are running out of road in Europe, fast.
Sure, we might expect the new, more nationalistic parties to come to power soon and change the direction of Europe. But there is not the money to make the changes needed, and the implementation of the changes needed are bound to cause much more economic problems before we see any fruits… If indeed we ever see any “Fruits”.
Now lets get back to our equity markets, which is the main reason for this report.
Over recent years, the main driver behind the rise of Equities have been government spending - which we know cannot continue - and the rise of Artificial Intelligence (AI).
I would suggest, whilst there is a lot of investment money being moved around the globe, the owners of this money are very fickle. What I mean is they will take their money off the table just as quick as they placed it in the markets.
In the case of AI, I am not saying that the market is booming the same way as we saw during the Dot.Com bubble. But we are seeing many of these AI companies being valued vast higher than their dividends and profitability justify.
Like with the DOT.COMS, the technology is sound. But that doesn’t mean we are going to see this industry continue to gather investors hands over fist forever. And if values start to ease, how quickly will the current investors look to cash out?
There is no question that Equity markets have experienced fabulous gains over recent years, greatly exceeding the historic average. But I would be remiss not to advise investors that nothing lasts forever.
As I see it, the accelerated rise in Equities over recent years is a sign of potential danger.
Sure, we could see more upside, and I would not be surprised to see more upside in equity markets. We could indeed see SP500 break above the 7800 level, and spike towards a potential high as much as 8400 over the short to medium term. But for me this will be a blow-off stage of this rally and following any further rally we should reasonably expect a 15 to 20% drop in indices values.
Timing is everything, and as I have discussed this potential for some time, I do feel like the little boy that has been crying wolf but considering the current global situation do we really expect indices to continue to grow at 25% every year. My experience tells me that is a foolish expectation.
In my opinion, we could see higher levels if either the war in Ukraine or Iran come to some conclusion, and we see an easing of oil prices dampen inflation.
But what then?
We can see Oil prices ease and inflation ease with it, but that is not going to encourage investors to throw money into European industries. That sis not going to help Europe turn its economy around. And 450 million poorer consumers - whose money is going to be taken by the EU - will not be buying as much as many suggest. Less money circulating, less growth!
We can continue to invest our money based on AI development, or on the rise and fall of bond prices, and in the short term, speculative opportunities are aplenty.
However, we must not ignore the bigger picture.
If Trump wins the mid-terms, we could see the equity markets rise for a little longer, simply because he seems to understand capital markets more than any other political leader. However, if he loses the mid-terms and his wings are clipped. The drop in global stock markets might happen quicker than we currently expect.
Not because of what actually happens in America - although that is important, but because Europe is completely fucked.
Now let’s leave the overall geopolitical picture and look at what our technical analysis is telling us.
S&P 500 - Technical Outlook: It’s Getting Near to a Blow-Off!
Current level: Approximately 7,660
The Primary Trend
If we strip everything else off the chart, the message is wonderfully simple:
Uptrend intact. Higher highs. Higher lows. Buyers still control the long-term tape.
Since the major 2022 low around 3,500, the market has effectively more than doubled. More importantly, the acceleration since 2023 has been extraordinary.
The sequence has been approximately:
3,500 → 4,800 → correction → 6,100 → correction → 6,900 → correction → 7,700.
Every serious sell-off has so far produced another buying opportunity.
However, there's a catch.
The slope of the advance has become progressively steeper. Markets can maintain trends for considerably longer than bears imagine, but they cannot accelerate indefinitely.
This is increasingly becoming a momentum market rather than a value-driven technical advance.
1. The Immediate Battleground: 7,700–8,000
The first obvious resistance lies around the recent high near 7,750–7,800.
Above that sits perhaps the most obvious technical magnet on the entire chart: 8,000
Round numbers aren't magical, but they matter psychologically, particularly when algorithms, options positioning and investor expectations converge around them.
A convincing weekly close above approximately 7,800 would therefore open the door toward: 8,000, followed by approximately: 8,200–8,350
My more aggressive upside extension would be around: 8,500
But if we reach 8,300–8,500 rapidly rather than gradually, I would regard that as potentially blow-off territory, not an invitation to chase the market.
2. Momentum Is Sending a Warning
This is where the chart becomes more interesting.
The Stochastic RSI is around 34–37, having retreated substantially from overbought territory.
Normally that could be constructive because momentum has reset without price collapsing.
In other words: price has remained close to record highs while StochRSI has already worked off its excesses.
That's potentially bullish.
If StochRSI turns higher from roughly 20–40 and crosses positively again, it could provide the fuel for another run through the highs.
However, there is another interpretation.
Momentum has weakened considerably while price sits at extreme levels.
If StochRSI subsequently fails around 50–60 and rolls over again, I would begin watching carefully for a larger momentum divergence.
3. MACD Is the Bigger Warning
MACD remains enormously elevated. That confirms just how powerful the underlying trend has been.
But look at the most recent structure.
The MACD lines appear to be flattening/converging, and your histogram is slightly negative at approximately -8.
That isn't remotely enough to declare a bear market.
But it says: The engine is still running, but somebody has taken their foot slightly off the accelerator.
The dangerous configuration would be: New S&P high + lower MACD high + subsequent bearish weekly crossover.
That would constitute one of the clearest warnings on this chart.
For the moment, therefore, MACD tells me:
Bull market, deteriorating momentum.
4. Elliott Wave Picture
There is a compelling Elliott Wave interpretation.
The advance from the 2022 low around 3,500 can reasonably be interpreted as a five-wave impulse.
Broadly:
- Wave 1: initial recovery from the 2022 low
- Wave 2: corrective pullback
- Wave 3: powerful acceleration through 2024
- Wave 4: sharp correction during 2025/26
- Wave 5: present move toward record highs
If that interpretation is correct, we are potentially inside the final major wave of the advance from the 2022 bottom.
Wave five could still travel considerably further.
That is important.
Calling "Wave 5" does not mean selling everything tomorrow.
Final waves are frequently where markets become most irrational.
They can overshoot.
They can accelerate.
And they can make bears look completely ridiculous immediately before the bear finally turns out to be right.
My preferred Wave-5 target zone would therefore be roughly: 7,900–8,400, with an outside possibility approaching 8,500+.
5. Support Levels
These are the areas I would mark heavily on the chart.
7,450–7,500
First short-term support.
Holding this keeps the immediate breakout structure intact.
7,150–7,250
Much more important.
A retracement into here would still be perfectly compatible with the bull market.
6,900–7,000
Major psychological and structural support.
Breaking 7,000 on a weekly closing basis would materially change my assessment.
6,500–6,600
This is where things become considerably more serious.
The previous violent correction established substantial market memory around this region.
6,000–6,200
Major long-term support.
Were the market to reach this area, we would be talking about something much larger than an ordinary correction.
The level that changes the whole picture
For me: 6,900 is the line in the sand.
Above there, weakness remains predominantly a correction within a secular bull market.
Sustained weekly trading beneath it would suggest that something more important is developing.
6. Fibonacci Perspective
Without the raw data I wouldn't pretend that individual points are exact, but the broad Fibonacci structure is useful.
Taking the large advance from approximately 3,500 to 7,700, a normal retracement would produce approximate targets around:
23.6%: ~6,700
38.2%: ~6,100
50%: ~5,600
Notice something interesting.
Those levels overlap extremely well with previous structural price support.
That's technical confluence.
Consequently, if we eventually get the correction I suspect is coming, 6,600–6,800 becomes exceptionally interesting.
And a deeper cyclical correction could eventually test approximately 6,000–6,200 without destroying the entire secular bull market.
7. The One Feature I Dislike
Look at the increasingly vertical trajectory of the market.
The 2016–2019 rise looks almost pedestrian compared with what we have seen recently.
The market now repeatedly does this: Rise, accelerate, collapse sharply, recover immediately, then accelerate again.
That tells us two things.
Liquidity remains extraordinarily supportive.
But increasingly large corrections are required to clear speculative excess.
The sell-offs visible around 2020, 2022 and more recently have become violent.
The next correction probably won't politely decline 3% and wait for everyone to buy it.
At some stage we're likely to see another 10–20% air pocket.
My 12-Month Roadmap
I would divide the coming year into three scenarios:
| Scenario | Probability | Target |
|---|---|---|
| Bull extension | 50% | 8,000–8,400 |
| Broad consolidation | 30% | 6,900–8,000 |
| Major correction | 20% | 6,000–6,600 |
My base case is therefore slightly unusual:
Higher first, lower later.
I suspect the S&P challenges 8,000, probably breaks it, and potentially reaches somewhere around 8,200–8,400.
But I would expect the risk of a substantial correction to rise dramatically thereafter.
A retreat of 15% from 8,300 would put the market around 7,050.
A 20% correction produces roughly 6,640.
Neither would be extraordinary historically.
What Would Make Me Aggressively Bullish?
A weekly close above 7,800, followed by successful retesting of approximately 7,700–7,800 as support, combined with:
- StochRSI turning upward;
- MACD histogram returning positive;
- MACD making a new momentum high;
- expanding volume.
That would make 8,200–8,500 quite realistic.
What Would Make Me Bearish?
I'd want to see a sequence rather than one bad week:
7,800 rejection → 7,400 failure → 7,000 break → bearish MACD expansion.
At that point the market would likely have completed a meaningful distribution/top formation.
Below 6,900, I'd start targeting: 6,600
then: 6,200 and potentially eventually 5,800–6,000.
The Old Man's Interpretation
This is one of those charts where bulls and bears can both be right — just at different times.
The bull says: "We're making record highs. Stop arguing with the tape."
Quite right.
The bear says: "Momentum is ageing, valuations are stretched and the advance is becoming parabolic."
Also, right.
The mistake would be assuming that because the market eventually deserves a correction, it must happen tomorrow.
Markets rarely work that conveniently.
My highest-conviction twelve-month path is:
7,660 → 7,900/8,000 → 8,200–8,400 → significant correction → 6,800–7,300 → eventual rebuilding.
And there is one number I'd scribble very heavily beside the coffee machine: 6,900
As long as that region survives, I'd treat major weakness as corrective.
If 6,900 gives way decisively on the weekly chart, then I stop calling it a correction and start asking whether the great bull market from the 2022 low has finally completed.
At the moment, though, the trend remains bullish — just increasingly mature, increasingly extended, and increasingly deserving of respect rather than blind enthusiasm.
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