As the end of the first half approaches, I am going to write a couple of posts on the larger picture.
First, what are the basic bull and bear cases for risk assets? This post considers the bull side.
Bull case
Major USA indexes have broken out of multi year consolidations to upside, and could be just in early phases of a major run. Here is the SPX quarterly chart with consolidation from 2000-2013. This means the breakout move is just 4.5 years old.
And this year, the big 2000 top in tech has been taken out in a very convincing fashion after several quarters of stall.
Using the Dow to go further back in price history, the last consolidation before this from 1966 top to 1982 real breakout was 16 years, followed by an 18 year mad bull stampede into the 2000 top.
Lastly, the 1929 top was not cleared until 1954, 25 years. Still, that was only a portion of the way to the 1966 high even though the market had increased substantially off Depression and WWII major lows. We could also consider the breakout above the 1930s highs (first in 1946 was fake-out) followed by breakout for real in 1949 - 20 years after 1929 peak and 12 years after 1937 high.
Also consider RSI on these charts in the lower panels. SPX RSI reached above 70 in 2013 Q3, and since then the low has been 65 in 2015 Q3. This is what happens in bull markets. Current reading of 79 is still well under 1998 top of 95. 1950s bull market quarterly chart RSI on INDU reached up to 90, still considerably higher than today. Also, that was just the first in a series of peaks until the 1966 top. Current charts do not show any divergences on quarterly chart RSI which tend to precede major tops in the market except on parabolic bubble tops like 1929.
It is safe to say that 4.5 years beyond and 50%+ above the 2000 top on SPX, and 6 months and approximately 20% above the 2000 top in NDX, that the current move is not a fake-out. From these examples, one could conclude the bull market is in early phases and should have plenty of room to run. At the very least we are likely to see quarterly chart RSIs go higher, then show divergence, before a major bull market high. This would imply many more quarters of upside.
Soon: the bear side.