US markets - will the bull run continue?

The bullishness in US markets continues unabated. DJIA has broken out of a strong resistance zone to make a new ATH in the week prior to last week, while last week was a narrow range inside candle signaling consolidation. Weekly chart below.

Weekly chart of DJIA illustrating a bullish breakout above strong resistance

S&P had broken out of a bullish pattern 2 months back and has made new highs in almost all 9 weeks ever since, including last week. Weekly chart below.

Weekly chart of S&P illustrating a new ATH last week after a breakout 2 months back

Looking back, the market has made a stunning recovery to ATHs post the low made on April 7th, with a few superficial dips followed by a strong recovery almost immediately throughout this journey. While the economy has been performing well (Q2 GDP at 3.3%), inflation has been cooling (PCE and CPE) and optimism for a rate cut in September has soared, does the rally have steam left?

The technical picture looks bullish as of last week with no signals to the contrary. However, beyond the technicals, the state of the market participants is euphoric with "Long Equity" at an all time high. Households now allocate ~49% of their financial assets to equities, the highest level on record—and above dot-com peak levels. Also interesting is the Bank of America’s “Cash Rule”: Institutional cash reserves dropped to just 3.9%, a 12-year low. This aligns with historical patterns where such low cash levels foreshadow corrections (median S&P 500 loss of ~-2%, worst up to -29%).

This is just a note of caution. Be careful with your longs as this might be the proverbial lull before the storm. Disclaimer : I might be completely wrong and markets may rally further if money becomes abundant and cheaper post the rate cut.

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