NOT A DAY FOR NEW HIGHS

The stock market in the United States was pretty flat today. European stocks were down severely (1.2%) as the European Central Bank held off on implementing any stimulus plan. However the Chinese market is up some 4.3% the easing of crisis in Hong Kong. Unemployment, diped below 300,000 last week. Although, most of the newly employed are employed at minimum wage. Sears holding company posted a disappointing third-quarter. We continue to be concerned about consumer spending.

This is typically time of year when the stock market goes up for mechanical reasons. Buying is done by hedge funds and pension funds that receive additional funds at this time year and try to get their performance to catch up to the market. We continue to believe that there are underlying negative factors that will affect the economy that have not shown up yet. Number one in that list of priorities is that all the income growth is going to the top 1% and leaving the middle class sucking air. Recent reports has shown that in the United States 40 people own approximately 50% of the wealth. Although job growth is up, most of that job growth is in the area of minimum wage jobs. The working poor sooner or later will have to capitulate and consumer spending, which drives our economy, will decline sharply. The other big problem I see, is that the 10 largest banks that owned 23% of the assets in the economy, during the last fiscal crisis, now have over 40% of the deposits. Too big to fail is getting dangerously close to causing another financial crisis. How long this bull market will last, no one can tell. The hype and  hubris can continue into 2015. However, I believe is the time to lighten up and maybe even buy a little gold.

 Current Value 12/4/2014 Dow NASDAQ S&P 500
17,900 4,769 2,071
Short Term UP UP UP
Int. Term Up Up Up
Long Term UP UP UP
Forecasted Trends DJIA NASDAQ S&P 500
Short Term UP UP UP
Int. Term ? ? ?
Long Term Sideway Sideways Sideways
Breakout Points DJIA NASDAQ S&P 500
Short Term Up (Resistance) 17,937 4,810 2,077
Short Term Down (Support) 15,855 4,116  1,820/1814
Int. Term Up (Resistance) 18,062 5,002 2,486
Int. Term Down (Support) 15,356/14,688 3,986/3294 1,560
Long Term Up (Resistance) 18,974 5,132 3,044
Long Term Down (Support) 50%12,025 62% 10,750 50%2,958 62% 2,555 50%1,390 62% 1,177
       

Carl M. Birkelbach 12/4/14

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