The economy and stock market face a considerable set of challenges. For one, inflation is way too high which is leading the Federal Reserve to take an aggressive, hawkish posture which is a powerful headwind for global growth and financial assets. Remarkably, earnings and the labor market have continued to grow and expand despite this challenge, but history tells us that eventually, these will start showing signs of decay as well.
Yet, from a technical perspective, we also have an indisputably bullish setup with a low-risk setup. The S&P 500 and other major averages undercut their mid-June low before embarking on a powerful, countertrend rally. We had a powerful bear market rally in March and from June to August that led to double-digit gains in the indices, and many opportunities for swing traders.
