Transcription
Hey everyone, and thanks for jumping back into the equity verse. Today, we're going to talk about the S&P 500. If you guys like the content, make sure you subscribe to the channel, give the video a thumbs up, and check out the sale on Into the Cryptoverse premium at into the cryptoverse.com.
It's been a little while since we talked about the S&P 500, but generally speaking, one of the things to expect, uh, back when, uh, the S&P swept the low from a year before, usually you get a big rally whenever that happens. Right now, it doesn't always lead to all-time highs, but in this case, it, it certainly has. And generally, the thesis on the stock market is that stocks trend higher unless they have a reason not to, right? That's the general idea. And, and that's why they call it climbing the wall of worry. We've talked about that many times. And obviously, there's been no shortage of worries this cycle with inflation concerns and tariffs and, and the unemployment rate slowly going higher. But there's always been a pocket of optimism somewhere, which is what the S&P has held on to.
Now, with this recent rally from the April low, the S&P has actually gone up about 39%. Um, now, trying to time individual, you know, local tops in the S&P is honestly a, a fool's errand, so I'm not going to necessarily try to do that. But I, what I would say is that a lot of times what happens in post-election years is that early Q1 or sorry, late Q1, early Q2 can be kind of weak. So, like March, April time frame can be a weak time in the markets. And this was the window for the, the S&P to drop. And if you guys followed me back then, we actually called for a, a weak S&P between February options expiration, February opex, and, and early to mid-April. And you can see that ultimately played out.
Now, the next time in post-election years that tend to be weak is somewhere around late September going into sort of like mid-October. And you'll actually notice something similar happened last cycle as well. There was a pullback by the S&P into early to mid-October in 2021, in fact. And back then, that was about a 5 to 6% drop. What's interesting is if the S&P were to drop about 5 to 6%, it would also put it at the bull market support band or the 20-week SMA or 21-week EMA.
So, to clarify or to show you what I mean, if you look at the year-to-date ROI of the S&P, the average year-to-date ROI of the S&P in post-election years, this is what it looks like, right? So, we went over here, we added the average of all prior post-election years going back to the 1920s. When you look at that, what you'll see is that there tends to be some weakness, uh, sort of like late February, early March, and then also into April. That's one of the weak times of the year for the S&P 500 in post-election years. Generally after that, the market trends up, but then as you get into late September and, and going into October, there's a little bit of more, there's a little bit more weakness followed by strength going into, into December.
So, if you look at 2025 compared to this year, you can see there was weakness early on. There was just more weakness early on and it overshot to the downside, and now it is overshot to the upside. But note that the strength by the S&P started right around when it normally starts, even though it went lower. And so I'm wondering if the S&P is going to start showing a little bit of weakness just for the next few weeks. If this does end up being a local top, I would expect the S&P to find a low, you know, within the next, call it say, three weeks, three to four weeks, probably by mid-October, uh, if that were to play out. And it, and it could just be a little bit of weakness.
Obviously, a lot of people want to know why. You can assign any narrative you want to to it. I mean, you could say, well, long end of yield curves, long end of the yield curve is rising because the, the Fed is cutting into an economy that doesn't necessarily need cuts. Uh, you could, you could argue that, um, you know, September, uh, just generally is a weak time for all markets in general, and so why not the S&P as well. Um, but so far, the S&P has actually done pretty well this month. It's just that, you know, could it be putting in a, a local top sometime in the next couple weeks? Seems like a, a relevant discussion to have.
The other reason and why you might see it show a little bit of weakness in the late September and early October is the same thing we've talked about before with other markets, like if you guys remember, we, we said that Bitcoin could have a correction after Ethereum hits an all-time high. And note that Ethereum hit an all-time high, uh, the week of August 18th. And if you overlay Bitcoin onto that chart, what you'll notice is that Bitcoin started showing weakness around the time that Ethereum hit all-time highs.
Now, the same thing could be happening with the Russell 2000 and the S&P. So, the Russell 2000 just hit an all-time high. And a lot of times when, when an asset, uh, sort of a frothier asset like the Russell 2000, when a, a frothier index hits all-time highs, the more major indices like the S&P can often find corrections. Now, you can see what happened last time. It got a deeper correction. So, I, I don't think you're going to have as big of a correction as that per se, but you could see the Russell fall back into its own bull market support band and then go higher. Um, and, and usually when that happens, then you would expect the S&P to get a similar type of drop. It's the same idea that I've talked about with gold and silver, right? Like gold will likely get a larger correction after silver makes new all-time highs, right? And silver is trending up to new all-time highs now. Still has a little bit of ways to go to get there. So, a lot of times when, you know, the blue chip of the asset class, um, is, is not the one in the lead when something else is running, that blue chip then gets a correction when the frothier thing hits an all-time high.
So, we just saw the Russell hit an all-time high, and it's also corresponding to the S&P 500 going into a historically weak part of of the year. Remember, the markets generally go up. Uh, occasionally they get pullbacks, and it's just sort of check back in and make sure things are fine. If you look back at the last several years, you'll notice there has been similar corrections back to the bull market support band around this time in 2021. You'll see it right there. Um, and in, uh, in 2017, you can see a Q3 correction right there in September back to that 20-week SMA. So, I'm expecting something similar to play out over the next few weeks. That doesn't mean that you can't wick to new, technically, doesn't mean you can't wick to new all-time highs, but I, I ultimately think that is an outcome to be prepared for.
And the thing, the reason why this could be timely is because a lot of times when the S&P starts to show weakness in the short term, Bitcoin can show weakness, but then Bitcoin often will lead out of that. So, if you look at 2023, you'll notice that Bitcoin like bottomed out pretty early on in the S&P correction, and then Bitcoin started going up even while the S&P continued to go down. So, you could argue a lot of people are under the assumption that Bitcoin lags the S&P. I'm under the assumption that Bitcoin actually leads the S&P. Bitcoin sniffs out things before the S&P does. And it makes fundamental sense as well because if you think about why, you know, what causes the S&P 500 to move, a lot of it is based on more passive investing, you know, like, uh, you know, additions to 401ks and stuff. People are buying, you know, Nvidia stock even if they don't realize that just by in passively investing into say, some 401k index funds in their 401k, they're buying Nvidia and Apple and Google and, and Meta and everything else, a lot of times, whether they even know it or not. Um, and so because of that, it can, it can allow those markets to stay a little bit elevated, uh, longer, but Bitcoin tends to, tends to sniff things out earlier. So, it can often go down before the S&P, but then it can also many times, not always, but many times it'll go up after, or, uh, it'll go up before the S&P in, in some of the breakouts. So, if the S&P were to get a correction into late September, early October, that would also correspond to Bitcoin trying to find a low over here and then hopefully gearing up for another move, uh, in, in the next month or two.
But those are my general views on the S&P 500 right now. It's been a really great rally. Um, and, and remember, if, if try not to be a hero, uh, generally speaking, topping is a process and bottoms are events, right? Markets bottom, um, the market bottoms are single events that come and go. Uh, but market tops are, are typically long, drawn-out processes that take months to ultimately play out. So that's one thing to consider.
If you guys like the content, make sure you subscribe to the channel, give the video a thumbs up, and again, check out the sale on Into the Cryptoverse premium at into the cryptoverse.com. I'll see you guys next time.