July 8, 2018 – Market Summary

END OF WEEK: Dow Up 185 pts or 0.75 pct ; S&P 500 Up 41 pts or 1.5 pct

INTERMEDIATE-TERM FORECAST: DOWN

LONG-TERM FORECAST: BEAR MARKET

INVESTMENT STANCE: SHOULD BE COMPLETELY OUT

ECONOMIC FORECAST: RECESSION IS 6-12 MONTHS AWAY

STOCK CRASH POTENTIAL (NEXT 4-6 MONTHS): HIGH

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Stocks rallied across the board last week. The volume was low during that holiday week. The S&P 500 still remains above their 50 day moving average while the Dow Jones Industrials is barely above their 200 day moving average. This index’s performance is far weaker than the S&P as it has struggled to maintain support.

In early June I plotted this as a possible path for the NYSE Composite.

It had followed that projection until last week when it popped above support. Though not shown, the 200 day moving average is 12632, which it currently is barely above. My guess us that the NYSE will break down once again.

The Dow Utilities have staged a surprisingly strong rally as of late. For a while it looked like the Utilities was in an entrenched bear market but now it has rallied above the key 200 day moving average.

Long Term

Long-term Elliott wave count from April 2009 to May 2017. The fifth wave is the final wave and it likely ended this past January.

Alternative View

This is the alternative (but lesser chance) scenario that may unfold. Though the chart is from early April, my alternative Elliott wave count is still the same.

Treasuries

There is a 108 basis point (1.08 percent) difference between the 1 month and the 30 year Treasury yield. At the beginning of the year (1/2/18) there was a 152 point difference. The steady narrowing is something to watch for. When short rates become higher than long-term rates, that normally indicates a recession is close at end.

CONCLUSION

Markets have been weakening. Right now we’re in a period of low activity because of the summer and the holidays. Should the S&P 500 and Dow Industrials continue to make new lows it could usher in a wave of selling by this fall when investor come back from vacation.

Next Update: July 22nd


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July 1, 2018 – Market Summary

END OF WEEK: Dow Down 309 pts or 1.3 pct ; S&P 500 Down 37 pts or 1.3 pct

INTERMEDIATE-TERM FORECAST: DOWN

LONG-TERM FORECAST: BEAR MARKET

INVESTMENT STANCE: SHOULD BE COMPLETELY OUT

ECONOMIC FORECAST: RECESSION IS 6-12 MONTHS AWAY

STOCK CRASH POTENTIAL (NEXT 4-6 MONTHS): HIGH

Continue reading “July 1, 2018 – Market Summary”

Interim Report – Stocks at a crossroads

Over the past two trading days, it has become more obvious that the markets are breaking down. The rally seen in the markets from February to early June has been very choppy and uninspiring. In addition the rally in the Dow Jones Industrials, Dow Transports, S&P 500, and NASDAQ have so far failed to bring it to new highs.

The Industrials yesterday closed below their 200 day moving average for the first time in almost exactly two years. Today, it closed right at the 200 day average.

As noted in my previous post, the S&P 500 closed right at support last Friday. I written that if it falls below it, it could usher in a wave of selling.

The NYSE Composite closed below support at the blue line drawn below for two days in a row. It’s rally since April has indeed been choppy. It is also below their 200 day averages.

Despite the S&P’s failure to make a new high, investors overall are very optimistic. The Commitment of Traders data showed a 3.5 year high buying extreme. When traders are this bullish, it usually means that some sort of decline is near.

June 24, 2018 – Market Summary

END OF WEEK: Dow Down 510 pts or 2.0 pct ; S&P 500 Down 25 pts or 0.9 pct

SHORT-TERM FORECAST – ?

INTERMEDIATE-TERM FORECAST: ?

LONG-TERM FORECAST: BEAR MARKET

INVESTMENT STANCE: SHOULD BE COMPLETELY OUT

ECONOMIC FORECAST: RECESSION IS 6-12 MONTHS AWAY

STOCK CRASH POTENTIAL (NEXT 4-6 MONTHS): HIGH

Continue reading “June 24, 2018 – Market Summary”

June 17, 2018 – Market Summary

END OF WEEK: Dow Down 226 pts or 0.9 pct ; S&P 500 unchanged

SHORT-TERM FORECAST – DOWN

INTERMEDIATE-TERM FORECAST: ?

LONG-TERM FORECAST: BEAR MARKET

INVESTMENT STANCE: SHOULD BE COMPLETELY OUT

ECONOMIC FORECAST: RECESSION IS 6-12 MONTHS AWAY

STOCK CRASH POTENTIAL (NEXT 4-6 MONTHS): HIGH

Continue reading “June 17, 2018 – Market Summary”

June 10, 2018 – Major Divergences

END OF WEEK: Dow Up 681 pts or 2.8 pct ; S&P 500 Up 44 pts or 1.6 pct

INTERMEDIATE-TERM FORECAST: RALLY CONTINUES FOR A LITTLE WHILE LONGER, THEN A DROP

LONG-TERM FORECAST: BEAR MARKET

INVESTMENT STANCE: SHOULD BE COMPLETELY OUT

ECONOMIC FORECAST: RECESSION IS 6-12 MONTHS AWAY

STOCK CRASH POTENTIAL (NEXT 4-6 MONTHS): HIGH

Continue reading “June 10, 2018 – Major Divergences”

Interim Report – Dow Utility Index is Crashing

The Dow Jones Utility averages, since hitting major resistance last week, have been tumbling ever since. In the financial media you wouldn’t know it as the rest of the equity markets have been climbing higher. In fact the NASDAQ on Tuesday made a new all-time high. The sentiment resoundingly is that of bullishness.

The Utes have lost almost six percent since the high last week. Today alone it lost two percent. The divergence between this index and the other equity indices is striking and likely is a preview of what’s in store for the markets as whole in the near future.