The September and October lows were also the first above the previous bottom (higher lows). Furthermore, September, October and November all saw the first three consecutive higher highs in 2004.

Now that we have made a series of higher highs, I'm expecting this pullback to lead to one of the more significant higher lows of the year -- and an ideal lower-risk entry point for the rest of the year.

Picture of a Breakout, Part 2 Lower lows/lower highs turn into higher lows/higher highs

Source: Maxim Group

Year-to-Date Positive: Sometime earlier this month, we moved to positive territory for the year on the S&P, Dow and Comp. Although we pivoted above and below the break-even line all year, the break now is most significant as it comes this late in the year. Why? This places enormous pressure on fund managers. It is easy to beat the averages when they are in negative territory -- all you have to do is hold cash, and your fund will be down less than the indices (that's considered outperforming). The danger to a fund manager comes from these fast reversals. If they are sitting in too much cash when the screens turn green, they very quickly see their performance slip. Suddenly, after a two-week rally, they are underperforming. A lot of this sidelined capital will be deployed before year's end. That also adds to the bullish momentum.

Picture of a Breakout, Part 3 S&P goes positive, year to date

Source: Maxim Group