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