The S&P 500 Still Has Room to Run

But if you think the market is done rising, think again. There are some factors forming a powerful cocktail to keep the bull run in place.

The S&P 500 Still Has Room to Run

See, the reality is stocks have a strong setup on the macro front right now. There are four key reasons why the S&P 500 still has room to run:

1. Fed rate cuts are imminent.
2. Earnings are expanding.
3. Trillions of dollars are sitting in money market accounts, waiting to be deployed.
4. Our proprietary Big Money Index (BMI) has stabilized.

On the fourth point, the BMI is a money-flow barometer that provides an idea of the true health of the average stock. It’s a 25-day moving average of netted buys and sells by Big Money investors.

After August’s crash, markets rebounded and the BMI stabilized. It’s neither overbought nor oversold, calmly sitting near 60%:

The relative quiet we’re experiencing now is common after extreme capitulation. In fact, in the last two years there have been five big drawdowns like the one this month. They’ve been followed by generally muted action:

But the current calmness could be the calm before the storm.

September Tends to Be Weak

Choppiness could arise because September tends to be weak for equities. Since 1990, September has proven to be the worst month of the year:

Using the exchange-traded fund SPDR S&P 500 ETF Trust (SPY) as a proxy, here are the last two Septembers for the S&P 500 (yellow boxes):

But don’t let one subpar month fool you. Over time, the months at that end of the calendar have proven to be the strongest of the year.

Bullish Season

As the above table shows, October, November, and December kick off bullish season with 1.5%, 2.1%, and 1.4% gains respectively for the S&P 500.

But it gets even better.

Right now, we’re in a rally. The S&P 500 gained 17.84% through Aug. 21. And when markets climb 10% or more through August, the remainder of the year averages a nearly 5% return:

So, with the S&P 500 at roughly 5,600 after gaining 10%+ to date, it could hit 5,900 by the end of 2024 if history holds.

That means it’s time to scoop up quality stocks. I’m talking about companies with strong earnings, bright guidance, and Big Money support. Some of those have been beaten down and look like values.

One is retailer ULTA Beauty Inc. (ULTA). Per FactSet, it has three-year sales and earnings growth of 22.8% and 173.9%, respectively. Also, it sports a profit margin of 11.5% and is expected to grow EPS by 9.2% in a year.

But it’s been under pressure this year:

Still, it’s made our MAP Top 20 report many times over the years and is an outlier in our data:

Plus, investing legend Warren Buffett recently reported a large stake in the company. It could be ripe for a rebound.

Embrace Any September Dip, Then Ride the Rip!

If you missed out on stocks in early August, don’t fret. September notoriously brings red markets and great opportunities.

Trust the MAPsignals process to embrace any September dip, then ride the rip!

If you’re a serious investor, Registered Investment Advisor (RIA), or a money manager looking for hedge-fund quality research, get started with a MAP PRO subscription today.

Disclosure: the author holds no positions in ULTA at the time of publication.