Are stocks breaking out into a new multiyear bull market?
Or was that the move, and now we’re left with a bunch of failed breakouts and a market that chops investors to pieces all year?
That’s the question.
And it’s not one you answer with opinions. It’s one you answer with price.
Every week I go through thousands of charts looking for evidence. Not headlines. Not narratives. Evidence.
Right now, there are three key areas that keep showing up. Different markets, different groups, same setup.
All of them just broke out. All of them are now pulling back. And all of them are sitting right at levels that matter.
What happens next in these three areas will tell us a lot about what kind of market we’re actually in.
So instead of guessing, let’s look at the charts and ask the only question that matters.
Are these breakouts real? Or are they about to fail?
Transports, Emerging, and Smalls
These are the three that keep coming up. Each one is sitting at a level that matters.
So are these the early signs of something much bigger?
Or are they just failed breakouts that trapped a lot of participants and are about to roll over?
Start with the Dow Jones Transportation Average.
This is a key piece of the U.S. market puzzle. It broke out to new all-time highs in February and has since pulled back to retest that breakout level.
This is exactly where we find out if buyers are for real:
Now look at emerging markets.
The Emerging Markets Index Fund (EEM) broke out earlier this year above its prior-cycle highs from 2021. That was a big deal.
And now, just like transports, it’s coming back to test that level from above:
Then we have small caps.
The Russell 2000 built a massive base and finally broke out above its prior-cycle peak in January and February.
Now it’s doing the same thing, pulling back and retesting that breakout:
Three different areas, all telling the same story.
If these levels hold, it confirms the breakout. It tells us there’s real demand underneath the surface, that rotation is happening and the bull market has more to go.
If they fail, that’s a different message. Because failed moves lead to fast moves in the opposite direction.
And if these three start breaking down, it’s not just a small-cap problem or an emerging markets problem. It’s a broader issue for equities as an asset class.
So this is where we are, right at the levels that decide whether these are real breakouts or traps.
And that’s where the real work begins.
Is It That Binary?
Whenever we get to moments like this, I like to slow down and ask a simple question.
Is it really this black and white?
Do these levels have to hold right now or everything falls apart?
Not necessarily.
Markets don’t move in straight lines. These could pull back, chop around, even shake people out a bit before resolving higher. That happens all the time.
Could buyers step in here and rip these higher right away?
Of course. Sentiment is already leaning that way.
But what if they don’t? What if these levels start to fail and former resistance turns back into resistance?
That’s the other side of the coin.
This isn’t about picking a side and hoping you’re right. It’s about recognizing where we are and what matters.
Technical analysis doesn’t give us certainty. It gives us context.
And right now, the context is clear.
We’re sitting at levels that will tell us everything we need to know.
So instead of making bold predictions, we ask better questions. We watch how price behaves here. And then we act accordingly.
Because if you’re serious about making money in this market, this is where it happens.
Right here.
At the levels that separate the winners from the victims.
Stay sharp,
JC Parets, CMT
Founder, TrendLabs