This week noticed the foremost fairness averages proceed a confirmed pullback part, with among the largest gainers within the first half of 2024 logging some main losses. Is that this some of the buyable dips of the 12 months? Or is that this just the start of a protracted decline with far more ache to return for buyers?

Right now, we’ll stroll by way of 4 potential outcomes for the S&P 500 index over the subsequent six to eight weeks. As I share every of those 4 future paths, I am going to describe the market situations that will possible be concerned, and I am going to additionally share my estimated likelihood for every state of affairs.

By the way in which, we carried out an analogous train for the S&P 500 again in April, and you could be stunned to see which state of affairs really performed out!

And keep in mind, the purpose of this train is threefold:

1. Take into account all 4 potential future paths for the index, take into consideration what would trigger every state of affairs to unfold by way of the macro drivers, and assessment what alerts/patterns/indicators would affirm the state of affairs.
2. Resolve which state of affairs you’re feeling is more than likely, and why you assume that is the case. Do not forget to drop me a remark and let me know your vote!
3. Take into consideration how every of the 4 eventualities would impression your present portfolio. How would you handle threat in every case? How and when would you are taking motion to adapt to this new actuality?

Let’s begin with essentially the most optimistic state of affairs, involving the S&P 500 making yet one more new all-time excessive because the bullish development resumes.

Choice 1: The Tremendous Bullish Situation

Our first state of affairs would imply that the transient pullback part is now over, and the S&P 500 and Nasdaq would energy to new all-time highs in August. By early September, we would be speaking in regards to the resurgence of the Magnificent 7 names, reflecting on how the markets in 2024 have diverged a lot from the normal seasonal patterns, and discussing the probability of the S&P ending 2024 above the 6000 stage.

Dave’s Vote: 5%

Choice 2: The Mildly Bullish Situation

What if the Magnificent 7 shares take a backseat to different sectors, similar to financials and industrials? If the worth commerce continues to work, as we have noticed within the final couple weeks, we may see a state of affairs the place a lot of shares are working effectively but it surely’s not sufficient to propel the fairness benchmarks a lot increased. The S&P 500 would not see a lot draw back on this state of affairs and would spend the subsequent six to eight weeks between 5400 and 5650.

Dave’s vote: 15%

Choice 3: The Mildly Bearish Situation

How a few state of affairs the place this pullback continues to plague the fairness markets, however the tempo of the decline lightens up a bit? The mega-cap development shares proceed to battle, however we do not see these full risk-off alerts and the VIX stays beneath 20. By early September, we’re down about 10% total off the July excessive, however buyers are licking their lips a few potential This fall rally into year-end 2024.

Dave’s vote: 60%

Choice 4: The Tremendous Bearish Situation

You all the time want to contemplate an extremely bearish state of affairs, if solely to remind your self that it is a risk, even a most unlikely one! What if this pullback is simply getting began, the S&P 500 fails to carry the 5000 stage, and we see a break beneath the 200-day transferring common? That might imply an analogous pullback to what we skilled in August and September 2023, and whereas we’re speaking in regards to the potential for a This fall rally, we’re all far more involved that there is much more draw back available earlier than it is all stated and executed.

Dave’s vote: 20%

What chances would you assign to every of those 4 eventualities? Take a look at the video beneath, after which drop a remark with which state of affairs you choose and why!

RR#6,

Dave

PS- Able to improve your funding course of? Take a look at my free behavioral investing course!

David Keller, CMT

Chief Market Strategist

StockCharts.com

Disclaimer: This weblog is for instructional functions solely and shouldn’t be construed as monetary recommendation. The concepts and techniques ought to by no means be used with out first assessing your individual private and monetary state of affairs, or with out consulting a monetary skilled. 

The writer doesn’t have a place in talked about securities on the time of publication.   Any opinions expressed herein are solely these of the writer and don’t in any means characterize the views or opinions of another particular person or entity.