weekend May 14 2022
I have students read the fab le of the Six Blind Men of Hinidustan and the Elephant to emphasize the importance
of point of view. Here are two views of NFLX, one suggesting a deeply oversold condition and the other suggesting the rout is just getting underway.
Here is NFLX on a log sacale, this makes changes shown ni a constant percentage. Point being that NFLX started from near nothings and soared to 700. the plunge so far is still a fraction of the overall gain.
Now here it is on a non log chart.
The drop on this chart suggests NFLX is a great buy or at least shold be nearing an important low.
I just finished reading Bob Prechter's latest EW Theorist. He makes the point that this is a higher degree of trend than the 1929 high. That high erased 90% of the DJIA value in by summer 932. Now as then as we have reported a handful of heavy weighted stocks, now FANG, have held up the averages. As shown several tiimes the percent of NASD stocks above their MAs peaked way back in February 2021 around 85%. Friday's rally carried it out of single digits to 12%.
While the market was over bought on just about every indicator the last few yeasrs, one must mentally adjust to the other way of thinking. the major trend is now down.
Industrials versus commodity prices
The FED and Congress have inflated the money supply the last few years and given us inflation. Here is the non log chart as with NFLX.
Log scale
This view suggests inflaton is just getting started. /and it is not baby formula or Putin's war, it is throwing money at imagined problems.
Conversely the CRB has just bottomed in 2020.
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