Weekend March 26, 2017
After some sixty votes to repeal all or parts of Obamacare since its passage, the Republicans
prove to be their own enemy,failing to even bring a vote on the issue. There is always a mix of moods. Wall Street
has been upbeat while the political mood world wide has been negative.
See our social mood section below for more on this, Penn State is back in the news.
Elliott Waves move in three steps in one direction and then two in the other.
In a bear market this means three down and two up. Above I labelled the five waves in a large Wave Three
to the downside. That suggests a Wave Four up is finishing its Wave A up, the second and fourth waves exhibit three rather than five divisions.
If so we are in for a protracted couple of years of sideways movement. That would be followed by a final or fifth Wave to new lows, yes below $25, the bottom of the large third wave.
Everyone in the energy business was optimistic at the large Wave Two high in 2013 at $110. Then as I wondered in this space why price was hgih when supply was plentiful, prices plunged over 75%. Now prices have doubled from the $25 low, or more than that to $54. But now price is below $50 and falling. This suggests te wave count now shown is correct.
Are oil prices predicting what is liable to happen in stock prices in the future, I would guess yes.
It may be that this is a fourth wave correction before a final fifth wave high. Possible this fourth wave could end in mid April, April 19 being
an annual meltdown in multiple markets. Or the highs may have been seen March 1. But Transports and Industrials both confirmed with new highs March 1. That suggests a third wave ended then. It may be that attempts to pass tax reform will be cited in the media as the backing for a final high in stocks.
This looks more corrective than not so the rally will likely resume in stocks at some point.
TWM versus Russell 2000
tWM is an inverse fund to the Russell 2000. It rises as RUT falls. One can see TWM has completed
12-3-4 waves and is apparently embarking on a fifth now. I own a few shares.
Five Year Yield
Rates are rising, the FED simply followed the market. Our benchmark fiver year yield has doubled since last summer, no wonder the FED
felt compelled to nudge a quarter point in the far shorter over night Funds Rate. Buyers of ultra low interest rate or negative interest rate bonds will
have plenty of reasons to regret that purchase in coming years. I would doubt such issues will even garner a bid.
Silver versus the Dollar
The Three MA lines are relevant to SLV the Silver ETF. They are moving up and the 50 day just crossed the 125 to the upside.
The green line is the US Dollar. Last year silver fell as the dollar rose. Now as the dollar begins to fall, silver is on the rise.
Expect new highs.
The Bottom Line
Stocks may have one more wave up as we do not have enough internal deterioration to call the top just yet. We have a Dow Theory confirmation
which would be typical of a top. However social mood, see below is rapidly deteriorating so we believe danger is high.
Interest rates are consolidating as stocks fall, after the big launch earlier this is expected. Much higher rates lie ahead.
The Dollar appears to have topped which helps gold and silver which are rallying again.
Energy alas has not rallied with Crude Oil trending down. A difficult period of consolidation followed by lower prices may well lie ahead.
Obamacare was signed into law March 22, 2010. It took Obama over a year to get it done. The fifth wave in stocks was just beginning. The fractal during its passage was appropriate
fourth wave low. Then it was simply all the Democrats voting for against all the Republicans voting against. Now as the markets are apparently cresting in a final fifth wave high,
we have more fractals. In fact the vote to replace Obamacare failed due to the Republican Freedom Caucus who refused to support the bill. And their demands were liable to upset more Centrist Republicans whose constituents liked some parts of Obamacare.So at top right on this chart, the other party fractures into disagreement. More fractals are occurring at a higher level of trend.
Our point is that mood is becoming more and more exclusionary as the markets reach higher and higher. Now we have fractals
among Republicans. In fact we have multiple fractals among Republicans which is why there was no way the bill could pass.
We see the same thing in Britain. Obama warns against Brexit. Brexit passes. Ireland stays in the EU. Now Scotland considers a second vote to exit the United Kingdom.
Bear markets are exclusionary. Trump wants to re make the US and NAFTA, and no on the Trans Pacific Trade deal. All of this screams exclusion.
Another feature of bear markets is that the previous heroes of bull markets lose their status.
And so it was perhaps fitting that Joe Paterno did not survive the child abuse scandal, and in fact died, at Penn State. But wait,now that
Sandusky is in jail, two former top administrators have plead guilty, and this past week former Penn State President Graham Spanier was found guilty of a misdemeanor count of child endangerment, and Penn State is out$250 Million in compliance and fines
The fact the Freeh is just now renewing his call for upending the new order speaks volumes about the exclusionary mood stalking Penn State.
In my state of Texas, the largest Baptist University Baylor has also spent some $250 M trying to cope with ignored rape allegations among its football team.
NCAA voted to withhold 25% of Baylor's tv football revenue until they are satisfied with new Baylor compliance policies.
We in now way condone mis-behavior, but outrage no matter how hard the two schools attempt to comply is rampant.
Social mood is trending negative.
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