25-Year Chart Signals Caution on Stocks

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25-Year Chart Signals Caution on Stocks

Here’s one of the most important things to know about investing in the stock market. There’s a time to be aggressive and there’s a time to be patient. Right now is a time to be patient.

Despite the massive headwind of COVID-19, U.S. stocks have been raging higher for the last 18 months.

  • The S&P 500 (SPY) is up 102% from the COVID low 18 months ago.
  • The tech heavy NASDAQ 100 (QQQ) is up 123% from the COVID low 18 months ago.

This rally has been awesome. My clients have done well in the strong market. However – it has also created a new challenge. After the big gains stocks look over bought and you can see that in the chart below.

Below is a 25-year chart on the S&P 500. The rally from the COVID low from March of 2020 has taken the index deep into a new all-time high.


The tech-heavy NASDAQ 100 is trading even deeper into a new all-time high. Here is a 21-year chart from 2000 to 2021. Same thing happening here – tech stocks trading deep into a new all-time high after a huge rally off the COVID low from March of 2020.

Here is the Message

I am not predicting stocks are going to crash. I don’t think that’s going to happen. But in the short run this is a good time to be more patient when buying stocks. Here’s what that means.

  • Look to buy stocks on dips and weakness.
  • Target stocks that are undervalued, trading low.
  • Avoid dumping large pools of cash into stocks.
  • Go for steady monthly deployments over big deployments.

Another reason for caution – September and October are historically two of the weakest months of the year for stocks. You can see that in the chart below from Yardeni Research.

After October, US stocks move into the strongest 6-month cycle of the year, from November through April. Any weakness in September and October is an opportunity to buy low ahead of the bullish cycle from November through April.

Here is How I Plan to Trade It

My plan is to patient throughout September and October. If there is weakness or a correction – that is a chance to buy. The goal is to have client cash fully deployed by the end of October – within 6-8 weeks.

Here are the leading targets:

  • Index funds
  • Big tech and tech stocks
  • Food and energy stocks
  • Alternative energy stocks
  • Cannabis stocks

I hope this brings everyone up to speed on the outlook for the next 6-8 weeks. Please contact me with any questions.

I’ll be back with another update next week – have a great day!

Disclaimer: This report is for entertainment purposes only. Every investor should consult with an investment advisor before making investment decisions. The Vodicka Group, Inc. is not a broker/dealer. We do not receive compensation for mentioning stocks. At various times, the clients, publishers and employees of Vodicka Group, Inc., may buy or sell the securities discussed for purposes of investment or trading.

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