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Oct. 17, 2019, 10:29 a.m. EDT

These charts tell us the bull market has a couple of years left to run

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By Barbara Kollmeyer, MarketWatch


Getty Images
Missing those animal spirits.

We’re at the start of earnings season, a trade deal is in flux and the economy continues to send mixed signals. But we just got a Brexit deal and Wall Street looks ready to celebrate too.

Our combined chart and call of the day delves into the debate about whether we’ve reached the end of the bull run for stocks or if more big gains are possible. It comes from the founder and chief executive officer of Ciovacco Capital Management , Chris Ciovacco, who sees the latter scenario unfolding if some stars align.

In a See It Market blog post, Ciovacco looks at historical charts to gauge the current market. He points to three periods that saw major trend reversals — a change in price direction — that wiped around 50% off the S&P from peak to trough. Those were 1973-74, 1999-01 and 2007-2008, and the charts all look similar. Here’s one:

But those charts look nothing like the S&P right now:

It looks more similar to these:

In the above two charts, the S&P consolidated — basically stuck to a range — then broke out and resumed a bullish trend, two years of gains in those cases, he said.

“The market is setup to break out. It needs one more piece of the puzzle —return of animal spirits,” Ciovacco told MarketWatch in follow-up comments. As for those spirits, he’s referring to the stock buying that can be spurred when investor uncertainty is replaced by confidence.

“Three drags have been trade, economic weakness and Brexit,” he adds, noting that China trade progress is the most important factor in determining upside or downside. As for the former, he says ”if the market believes China is moving in right direction with a long-term path forward... that could do it.”

President Donald Trump delaying planned December tariffs on China would be a good start, he said.

The market

/zigman2/quotes/210561263/realtime/sampled GBPUSD 1.2856, +0.0004, +0.0311%
The Brexit boost

A Brexit deal definitely is triggering some upbeat spirits. The Dow /zigman2/quotes/210598065/realtime DJIA +0.33%  , S&P /zigman2/quotes/210599714/realtime SPX +0.07% and Nasdaq /zigman2/quotes/210598365/realtime COMP -0.05% are all up nicely in early trades, along with the pound /zigman2/quotes/210561263/realtime/sampled GBPUSD +0.0311% and Europe stocks /zigman2/quotes/210599654/delayed XX:SXXP -0.13%  .

/zigman2/quotes/210598065/realtime
US : Dow Jones Global
27,783.59
+92.10 +0.33%
Volume: 278.39M
Nov. 13, 2019 4:56p
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/zigman2/quotes/210599714/realtime
US : S&P US
3,094.04
+2.20 +0.07%
Volume: 1.72B
Nov. 13, 2019 4:56p
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/zigman2/quotes/210598365/realtime
US : U.S.: Nasdaq
8,482.10
-3.99 -0.05%
Volume: 1.99M
Nov. 13, 2019 5:16p
loading...
/zigman2/quotes/210561263/realtime/sampled
US : Tullett Prebon
1.2856
+0.0004 +0.0311%
Volume: 0.0000
Nov. 14, 2019 4:55a
loading...
/zigman2/quotes/210599654/delayed
XX : STOXX
405.35
-0.51 -0.13%
Volume: 0.00
Nov. 14, 2019 10:40a
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