S&P 500 Headed to 10,000? AI Charts Point to More Upside

[music] >> Okay, everybody. Let's go ahead and get started here. Hope you having a good day having a good day. Um Welcome if you're new. And uh Let's see here. So Starting off with the S&P 500 Um hang on 1 second, okay? Since 2022, the low in 2022 been tracing this ending diagonal pattern. Right? And I went through the various interpretations of this ending diagonal. Uh maybe 2 or 3 weeks ago, I believe. And using nothing but price action, just you know, how these patterns play out. You know, not having to force some extreme interpretation. Uh the green count is really what lines up best. Um and interestingly enough, it lines up with the macro backdrop that I've been talking about. So, I'll give you an update on today. And it also lines up with the charts we're seeing in um and and within the AI sector. And just to kind of set that stage you know, I'll talk about Let me just show you Micron real quick before going [clears throat] back into the S&P 500. >> [snorts] >> In 2022, you have wave 1, 2, and then this vertical third wave explosion. You can see with volume expanding, volume minimum reaching a peak. You can really see it in the uh Um you can see in the RSI, but I can't pull that up. Um and it's incomplete. Right? Um this drop that we had, though it may be painful, is extremely shallow in relation to the wave pattern that's preceding it. This should go to 616.396. That would be a standard fourth wave within this large wave pattern. So, if we only get this shallow pullback, uh then break out, I mean we're heading at least heading up to 1700 297. But, that won't complete the uptrend that's been in play for a long time. It looks like this is a secular uptrend that will be going on for several years. There'll be very painful fourth waves along the way. The higher we go, the more painful the fourth waves will become, but they will still be corrections within secular uptrends. And you can see that, um not just with Micron. You can see that in um the South Korean Kospi, which is dominated by Samsung and HK SK Hynix, which, you know, mem- all three are competing for memory. Um And this chart looks very similar to Micron. You know, going back to 2020, 1 2 1 2, there's your third wave. Incomplete right here is a fourth wave. Uh we can drop down to this, you know, 4,000 kind of 600 level, and it would still be a fourth wave. That's how big this pattern is. So, uh will we make another low? Doesn't really matter in the in the grand scheme. It's in- it's an incomplete uptrend, and it had looks like it has many years to go. Um and so, all these charts that we've been talking about from Lumentum, AOI, SiTime, SiMo, the ones that we own, >> [clears throat] >> uh they look like this to some degree. Some more so, some less so. But, they look like they have they're in these secular uptrends that will go on for, you know, at least a couple more years, at least. Um I could be wrong about that, you know, if all of a sudden supports start breaking, then we have to, you know, you know, you know, go into our risk management plan and and pivot. But, but from what I can see, this is what all these AI charts are lining up for. Um so, now going back to the S&P 500, um this green count lines up with those charts. And so, starting from 2022 all the way up until January 2025, that was wave one of a diagonal. Wave two was very short and relatively uh relatively quick in the grand scheme. So, that was wave two, and then we had five waves up for A, three down into uh late March of this year, five up, three down, and then we should get some kind of an explosion higher uh to mark the third wave of this bigger diagonal, uh which would, you know, take us up into the 9, 10,000 range, very deep fourth wave, which would be very painful to deal with. Um but it will once again likely be a cyclical uh bear market within a secular bull market that should have one more big high, you know, and this is going into like 2028. Uh that's where those are, this count is going, and it lines up with the AI theme. >> [snorts] >> Um so, that being said, that's my primary count. Now, we could pull forward this large third wave. Instead of targeting 9,000 and 10,000, we're kind of there right now. Um and that would basically see a larger drop down to 6,000, 5,500. That would probably start soon, and then we'd see one more large uptrend into 2027, early 2028, something like that. Which still lines up with um the AI charts, not as much so as the green count, but still lines up with them. So, those are the big counts that I'm looking for. Um the big difference between green and blue is going to be what kind of volatility do we get, if any, um over the next few weeks. Um >> [snorts] >> And so, just to break that down a little bit here. Um this is the S&P 500. Let me get rid of these moving averages and try to make this as clean as possible. This is the S&P 500. Okay, and this is from the March low. And if you follow the green count, so we're basically starting this um uh I think it's a C wave of uh wave three, okay, of a diagonal. So, it's going to be a five-wave pattern, which is what we're getting. So, direct vertical move five waves off the low. It tops here in June. We get a very shallow second wave. And what we're in right now, this overlapping mess that's following this trend channel, this is a diagonal. And so, diagonals show up in two areas, the beginning of a trend or the end of a trend. So, the green count is saying it's the beginning of wave three. It's wave one of wave three. So, what we need is we need one more high, which would probably happen sometime I mean at this point next week. We get one more high. That would complete it, and then we get some kind of volatility back down to, you know, 73 72 65, somewhere around there, hold 72 65, and then we get our explosion higher. I mean, really into early next year is when that would probably really get going. Um >> [snorts] >> So, that's the best-case scenario um from what if we get one more high, if we get that one more high. Um the the kind of worst-case scenario would be that we break 72 65. Now, if that happens, then, you know, we could see it go as low as 7,000. We could go as low as 6,600 on the S&P 500. That's a pretty deep correction. Um just from where we are right now. I mean, you're looking at like a 12 13% correction. That's That's That's not That's not a a mild correction for the S&P 500. But, that's what we could be we could be playing out. And if that does happen, that's saying this diagonal is an ending diagonal, right? And the green count has to get reworked. So, instead of this right here being your second wave, then what you're looking at is something like this. We have this um we have a second wave that's happening right now. So, >> [snorts] >> it's still bullish. It's still kind of the posture would be quite bullish and it still kind of allows for that melt up to happen that we've been talking about. But we would have to hold these levels right here. Below 6683, 6524, and the odds shift drastically that you're in this larger fourth wave and you're looking at a drop to 6,000 6,500 at that point. >> [snorts] >> Um I imagine, especially with how the hedge signal from Wealth Umbrella, how it's been tracking, that we would be hedged fully hedged long before that decision would have to be made. Um So, uh that's kind of the game plan right now. Is [snorts] what are we going to get going into next week? If we get one more high, best case scenario, about a 5% correction. Worst case scenario, I think about a 10 to 12% correction. Um well, actual worst case scenario, breaking 6,500, then you're looking at a you're in that fourth wave down to 6,000 to 5,500. I don't know if that's going to be playing out though, but we'll have to see what we get. Um So, that being said, if we do get one more high, I want to point out that this would be one more high that's happening into um this really large Oh, one second. Zoom is kind of messy. All right, there we go. Uh this cycle that's been in play for a very long time. I mean, just the last few times it's come into play, top in 2018, at the COVID low, 2021 high, 2022 high, excuse me, 2023 high, the 2025 high, and now here it is again. Um and it's lining up with this other pretty big cycle. And so the question is, what's going to happen here? Is it going to be an instance like say this, one of these where we just get like a correction, a deep correction, or could it be an instance like say right here? Like in 2017, it showed up and the market traded sideways until it was over, then it resumed its uptrend. And we have to be on guard for that. And so we're we're being a little bit defensive as we go into this this cycle just to see what we get. If we get on the other end of this cycle and nothing happens, that's great news. You know, then then, you know, it's uh we'll probably be looking just to get back into the market with the cash that we did raise, the gains that we have taken. But um that's kind of where we are with this cycle. And so that's why if we get that one more high in the next week, um which would be the final fifth wave of this diagonal, then we are setting up for some kind of a top. Okay? So that's the game plan um right there. Um moving on to the macro backdrop, so we were at like a plus 22, I believe, last last week, and this composite score has dropped to 12. It's still relatively bullish. Uh once you start getting down into single digits, that's where it gets kind of into the warning zones from the back test that I've done. But, you know, growth is still very strong. It was a plus nine, now it's a plus seven. Private sector income has dropped a little bit. Uh nothing to really get uh too um too concerned about. Uh you tend to not get extraordinarily bad corrections when growth is this strong. That's a big big tailwind to the markets. Inflation isn't really acting up right now. Uh recession indicators seem very healthy, fiscal policy very healthy, moderate headwind in monetary policy and crowding, even though this has gotten significantly better. Um what really has fallen off cliff is liquidity, global liquidity. Uh domestic liquidity has turned negative in the US. Um bond volatility, which of course with TLT breaking down has gone up. Um it's in like a strong kind of impulse higher. Uh 10-year, you know, term premium for the 10-year Treasury has gone up significantly and the US dollar is in a new uptrend. So, all that together would line up in my opinion for some kind of a correction within like a bigger uptrend. You know, really until you see growth just totally collapse. Um you know, I I I really question how deep this this thing can go in terms of volatility. But, that would likely be the scenario that I'd be looking at some kind of narrative backing it up. Liquidity is a big deal and um and um >> [snorts] >> it's um definitely turned negative over the last couple weeks, which we'll get into a little bit, okay? Um but, before we do that, looking at the Qs, so the S&P looks like it's going to make a new high. For the Qs, I have it also making a new high. This would be kind of an inverted head and shoulder pattern. I think that would suck in a lot of people. But, unless we get like a really vertical move higher that really kind of breaks above, I would say this kind of 780 on the Qs, then it would likely be a bull trap and it would be uh an expanded flat correction. So, you have your A wave down to here, B wave goes above the top of A, and then you get a vertical drop and C down to like 6,400. Um that that would be uh a strong buying scenario, in my opinion. And if we take a look at the at SMH, so let me go down to the quicker time frame, smaller time frame. >> [gasps] >> So, it's been strong of recent, but it's still well off its highs. So, think about it. The S&P 500 would make would complete an ending diagonal to all-time highs next week. And SMH would not. So, that would be a very notable divergence, which we're already getting some divergences right now. Like as you can see, volume falling off a cliff as we go higher, so is momentum. We're in this target zone where the length of this wave right here is almost the exact length of this wave. So, a symmetrical three-wave move. Not ideal. And when you compare that with the divergence in the S&P 500, I wouldn't sleep on this blue count. But until 545 breaks, [music] >> [music]