- Francois Lenoir/Reuters
After a post-Brexit misstep, the stock market has regained its footing and roared past all-time highs in the past week.
The strength has been broad-based, and it appears to Sheba Jafari, a technical analyst at Goldman Sachs, that this upward trend in markets could continue for a long time.
“If this is truly a 3rd wave from June, it should really move past 2,191 and eventually reach a 1.618 target at ~2,263,” Jafari wrote in a note to clients Sunday.
Jafari, who calls the recent rally “textbook,” is using a method of technical analysis that posits that market behavior is orderly and moves in “waves,” thus it can be tracked as long as you can read the signals the market is telling you.
Based on these signals, Jafari believes that not only is there a short-term uptick of at least 100 points in the S&P based on Friday’s closing price, but in the long run there is even more good news for stock investors.
“Narrowing in even further, the move since February is likely to be wave (5) in a sequence that starting in 2010,” Jafari wrote. “As such, the minimum target for wave (5)/III is 2,172 (now effectively satisfied). An extended target goes out to 2,394-2,452.”
So to clarify: In the short-term, Jafari is projecting a target of 2,263, and over a month the index should get as high as 2,452. To get to these points, however, there may be some pain. And to be clear, this is Jafari’s and the technical-analysis team’s view, not the Goldman Sachs house view.
“Would view 2,263 as an ideal place to start a 4th wave correction,” Jafari wrote. “Pullbacks up to that point should be shallow and short-term (similar to price action earlier this year in March/April).”
There may be some stumbles on the way up, but evidently Jafari thinks the rally has a way to go.
- Goldman Sachs