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(On normal market days, I publish everything first–usually by three days or so–on my subscription newsletter Jubak Asset Management ( But on days when the market moves big–up or down–or when there’s some breaking news that all my readers need to know, I’ll publish my take simultaneously on both sites. That’s the case, I think, today.)


After toying with investors last week, the Standard & Poor’s closed above 1140—at 1142.71–today, September 20.

That takes the index above the top of the trading range for the last four months. Stocks have now set a higher low in August and a higher high in September.

That’s important not because it’s a signal that in the short-term stocks are going to rally like it’s March 2009.

A move like this is significant because of what it tells us about where we’ve been since the market put in its 2010 high back on April 23 at 1217.

The fear since then as stocks dragged lower, setting lower highs at each stage of that move, into August was that the rally that began in March was over and that stocks were headed into a new bear market. That would have been a huge disappointment. A rally after a huge bear market that lasts just a little more thn a year is extremely short by historical standards.

A new high in September, though, argues that rather than being the beginning of a new bear, the moves since April make up a consolidation of the March 2009 rally in preparation for a new stage that continues the March 2009 rally from this new foundation.

The most likely course from here isn’t some pedal to the metal rally. Most consolidations don’t work like that. It takes more than one move to a new high to build a foundation for the next sustained move to the upside.

The most likely next move for stocks will be for them to fall back after setting the new high today. They could well stretch higher—much will depend on the spate of housing data that arrives tomorrow, Wednesday, and Thursday. If the numbers surprise to the upside, it’s likely that momentum will take us higher in the short term.

But I’d be very surprised if stocks stage an assault on the April 23 high of 1217 without pulling back to build a new foundation.

If I’m right about what this break above 1140 means, then that pullback would be to a higher low. And then stocks would be ready to take another shot at a higher high somewhere over today’s 1140.