Markets have been fixated on several key themes in the last couple of months. There’s the Syrian war, the Iran agreement on nukes, multiple concerns in Korea, economic growth and inflation, and higher interest rates, explains Jon Strebler, editor of Dow Theory Letters.

Then there’s the prospect of trade wars breaking out, something that bounces back and forth between seeming inevitable and seeming unlikely. 

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What the market is telling us currently is no surprise; it is still ruminating about all the possible turns of events, while still digesting its tremendous upward move of 2016-2018. This weekly S&P bar chart illustrates an ascending triangle pattern, delineated by the blue and maroon lines.

Whichever way the S&P breaks out here should be followed by a significant move continuing in that direction, or so the probabilities say.

Given that we’re still in a bull market, and that previous bull markets have moved higher after a pattern like this, I’d venture that the probabilities favor a break above the maroon trendline, and therefore a new leg up in this bull market. 

But that probability is hardly a slam-dunk. My personal belief is that, even if the market breaks this triangle in favor of the bulls, the risk/reward situation nevertheless does not justify adding to stock positions.

As all of us at Dow Theory Letters have documented, it is rather late in a mature bull market that is confronting a number of very serious and potentially devastating geopolitical and economic dangers, while stocks are at fairly overpriced levels. "Bulls make money, bears make money, but pigs get slaughtered" — goes the old commodity trading adage.  

We, or at least I, don’t need to take all those last chips off the table, at the risk of losing the great gains already amassed. One of Richard Russell’s sagest bits of advice compared the Rich Man to the Poor Man. The Rich Man doesn’t need the markets, he reminded us. If stocks, or any other investment item, are great bargains, then he’ll buy them.

But if not, then he’s happy to just sit there, perhaps year after year, until there are great bargains. Stocks are not great bargains now, regardless of what the Dow Averages, PTI, and this S&P chart end up doing.

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