Weekend March 11, 2018
Friday was an exact nine year anniversary of the March 9, 2009 low in stocks. This nine year cycle has alternated between highs and lows.
2018 High
2009 Low
2000 High
1991 Low at 2350 October 1990 as Desert Shield got underway August 1990-February 1991
1982 Final lows of 1966-1982 bear market, start of 1982-2000 bull market
1973 DJIA hits 1,044 for first time since 1966 then collapses 50% to 577 in two years amid Watergate resignation and oil embargo
If he market collapsed by half from its current level that would only take it back to the 200 month MA at 13,156!
Industrials
Despite the 440 point rally Friday, the index is just back to the 50 day MA. It has not exceeded the prior high at 26,616 Friday Jan 26,2018.
Transports
Same situation for the Transports. As Richard Russell used to say, me, I'm going with the Dow Theory. That theory created i 1896 by Charles Dow held that the Industrials and Transports both needed to record new records, high or low, for a buy or sell signal. Given the strength of the nine year cycle, right to the day, unless both make new highs this correction is not over yet.Yes the NDX did make a new high powered by the FANG stocks that are in vogue now. The Dow Composite 65 looks just like the DJIA and Transports, below the 50 day MA.
Given the parabolic condition of the first monthly chart that could be quite a correction. John Murphy at stockcharts.com suggests the NDX new high means stocks will not re-test the recent lows and that this correction is pretty well done now. Carl Swenlin was thinking bear market. I am going to respect the power of the nine year cycle and the Dow Theory for now.
As best I can tell the John Murphy position is the majority position, just tune into CBNC. No doubt investor sentiment is wildly positive. Lately that has been at record highs. W D Gann theorized that trend changes happend at the intersection of price and time. This seems to be one of those times to me.
Gold
Gold completed its 5 year bear market at the end of 2015. Wave One advanced in 2016. Wave Two low bottomed a year later in Fb 2017. The market has corrected sideways since but should now be at another significant juncture. It has stayed above 1300 and looks ready for a significant advance. That view is re enforced by the Goldman Sachs Commodity Index
Bullish Percent Gold Miners
Here is a rising wedge in BPGDM. A break one way or the other will be significant.
GNX
The Goldman Sachs Commodity Index is also in a new uptrend. All the goosing of the world's economies with Central Bank QE purchases of
bonds has lots of money sloshing around. That will likely result in higher prices of everything. GSCI is heavily weighted, over half, for energy prices.
Crude Oil
Given the GNX weighting for energy it is not surprising the oil and GNX charts are so similar.
Silver
Silver has not rallied with gold but appears to be building a base. The weekly PAR SAR is on a buy signal.
Interest Rates on the Rise Five Year
Interest rates are rising. The five year yield surpassed its 2011 high suggesting ever higher rates. This too supports the idea of a commodity rally starting as stocks peak.
Energy
XLE energy producers has trended sideways for the last years. XES energy service has been near its 209 lows. Bell weather Apache APA is below its 2009 low of $47, now trading at 35.32. This is puzzling but that is what happens at commodity lows.
Bottom Line
Events are much like the setting for the 1973 high. A President who is unpopular with the media has a 49% approval rating with the public. Stock prices are at new highs. The economy looks strong, a good jobs report Friday, low unemployment among minorities, what could go wrong? I am respecting the probability that the nine year stock cycles is peaking. Interest rates have been on hold for the last couple of months while stocks corrected. Commodity prices appear poised for an extended rally.
Social Mood
Lloyd Blankfein plans to step down at the Goldman CEO by year end. He might do well to accelerate that departure. But at least he is seeing a reason to exit.
The WSJ Editorial suggested all things could go hay wire as Trump offers to meet with Kim Jong Un. Regan met with Gorbachev in Iceland after their aides had negotiated for months. That capped the negotiations. Trump has turned the cycle on its head.
But nothing Clinton, Bush, Obama tried worked with North Korea. Given Trump's media savvy, has anyone considered the potential for calling out this brutal regime for all its faults? I have not seen a mention of location bu it should be outside North Korea. This could be far more difficult for Kim than he realizes. Kim is certainly not used to open questioning and especially from someone who takes no prisoners, just ask Jeb Bush.
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