Is the Market Overdue for a Crash? What History Shows

Summary

The market may not be as overextended as it appears, despite recent volatility. Historically, bull runs from the 200 EMA have lasted significantly longer and achieved higher percentage gains than the current move. For example, past rallies have seen increases of 42%, 115%, and 76% over periods of hundreds of days, while the current market has moved 59% in 497 days. This suggests there's still room for growth. Key upcoming events include the CPI report, impacting Fed policy, and the SpaceX IPO, a significant liquidity event. The removal of the pattern day trader rule also opens new opportunities for retail investors. While midterm election years typically see market pullbacks of at least 20%, current price action remains above the weekly 9 EMA, indicating bullish trends. Recent pullbacks have been modest, around 3-5%, and a test of the 9 EMA is still a possibility before further upside. The VIX is currently below 21, suggesting market fear is not at extreme levels. Investors should monitor the 735 level on the spy, as a break below it could signal further declines.