The Bulls and the Bears are temporarily in balance.
I have not recently been writing much about the stock market. The Bulls and the Bears seem to be temporarily fighting each other off. It reminds me of the picador’s in a bullfight, where the bull and the horse are struggling against each other, with neither winning.
As far as I’m concerned, the biggest latest news is the win of the liberals in Canada. Originally they had little chance of winning, just as Bernie Sanders liberal views have little chance of winning here in the US. However, if it can happen in Canada, it may just happen here. The Republican top two candidates appear to be reckless barbarians and along with the do-nothing Republican Congress, are doing damage to conservatism. When Bernie Sanders says he is a democratic socialist, he does not mean that he would let the government take over our industries. Both capitalism and socialism in its extremes are selfish and are damaging to the greater good. Pure Capitalism lets capital dominate labor, whereas in pure Socialism, lets labor dominates capital. Both are harmful. Let’s make America great again! I agree. Capitalism, government and labor were in perfect balance during the 1950s when corporate CEOs were paid no more than 50 times the average worker and all boats rose. It was a perfect balance between materialism, individualism and social justice. Our politicians were actually more interested in the common good than in their own bank accounts. The American dream was, that if you give individuals access to education and upward mobility, they will pursue affluence and personal happiness and they will grow more ‘reasonable’. The 40 members of the Freedom Caucus in the House of Representatives are not reasonable. They are ideologists who believe in no government, not less government as do the Libertarians. The result is gridlock for the entire country. Their long list of demands for a new speaker has few legislative goals, except to shut down the government.
Meanwhile, we are facing an ever dangerous world in the Middle East , of those who have rejected Democratic capitalism and a secular life and instead have sought meaning in fanaticism, sect, tribe and more brutal ideologies. My big fear, and so should yours, would be a dirty bomb in one of our major cities from these fanatics. Reasonableness has been trampled by religious ideologies. Fanatic youth flock to the Middle East to challenge our dominance. Well-intentioned bystanders become vulnerable victims, as they try to immigrate to safer places. Religious stabbings are occurring in civilized cities, where the victims are random. The history of humankind is at a crossroads. Will a bygone era of ignorance and religion dominate or will we enter a transitional period between these two epics, were religious influences and theocracy will begin to fade, as did the followers of the Egyptian Ra and the Greek Apollo, and a new era of understanding, wisdom and social justice prevail? I am encouraged by the liberal win in Canada. They have national healthcare, affordable access to college and a limited defense budget. Their middle-class is now ranked higher than our middle-class. The new Prime Minister talks about rebuilding infrastructure and eliminating poverty. Impossible here you say? Not really, especially when you consider the alternative. The Bear market I’m predicting does not have to happen. There is an alternative to despair. It’s called hope!
10/15/15 Quiet, before the storm Isn’t life wonderful? The Dow is above 17,000, the DAX is above 10,000, and the Nikkei is above 18,000 and oil is above the $45 a barrel. Although, there are still some shocks with earnings reports like Walmart and some banks, the earnings season does not seem to be affecting the stock market. However the big problem appears to be a threat government shutdown in November. Until that unknown is decided the Fed will probably stay on the sidelines by delaying any rate increase. The NASDAQ and the Russell 2000 has so far not followed the Dow and the S&P 500 into higher ground. If this rally is to continue, that must happen soon. So, keep your eye out for the NASDAQ to breakout above 4,960 or watch out below.
I continue to feel that the sideways market we have seen since September is an anomaly and that the Bear Market will continue again soon. In the meantime, enjoy the respite and prepare for the worst.
10/9/2015 Dow breaks above September high. Will the S&P and NASDAQ markets follow?
Wall Street is celebrating the dodging of a bullet, after the Dow industrial s broke out into high ground, above the August selloff 16,933 high. The markets seem to have shaken off a lot of negatives. China’s market went down 45%, commodity prices continued to fall, oil prices fell below $40 a barrel, and earnings forecast are lower, GDP has been foretasted lower from 2.4% to 1.9% for 2015. By negative scenario seems to be waived off in favor of hubris. There is a crack in the egg, but the egg remains intact. The Dow, appears to be leading the pack with the NASDAQ index and the Russell 1000 lagging behind. Consumers seem to be leading US economy away from any recession. Credit card debt is a share of GDP is dropped to 1994 lows. Mortgage debt is back to 2005 levels. However, a government shutdown in November could put our Bear Market scenario back on track.
I am surprised by the strength of the Dow. The question continues to remain will China in emerging markets hold of the US economy or will the US economy revitalize the global economy. China may be the key to this as 29 countries depend on China to buy at least 20% of their exports. We shall see? The stock markets in the US are showing some unexpected strength. After meeting our intermediate down side goal for the Dow Industrial’s and 15,331 in August, the markets have since been moving sideways. However, the Dow has broken above 16 933 September high. If the S&P 500 goes above 2020, and the NASDAQ composite above 4960, our Bear Market scenario may be delayed. I believe the new highs, if they do occur, will be temporary and will indicate an Elliott Wave a Un- Orthodox top, which is what occurred in 1929., This I believe will be a “false rally”. Do not join the crowd! The hubris is all hype at this level. The stage is set for not just a severe decline, but an economic scenario that will be very dangerous for everyone.
Why a stock market rally? As I said once before ‘It’s three men in a tub, rub a dub dub, nobody wants to pull the plug. There is talk, the Fed wants to delay increasing interest rates because of an unsure economy. Monetary policy, in my opinion, seems useless. The only thing, I believe can save this economic bear market scenario, is a progressive fiscal policy. This under current conditions will be impossible to execute.
I continue to see corporate earnings as weak, the bond market as dangerous, banks as a house of cards, and international emerging market growth as negative and my Bear Market deflation scenario as on track.
|Foretasted Trend||DJIA||NASDAQ||S&P 500|
|Long Term||Bear Market?||Bear Market?||Bear Market?|
|Breakout Points||DJIA||NASDAQ||S&P 500|
|Short Term Up (Resistance)||17,400||4,960||2,021|
|Short Term Down (Support)||15,881/ 15,651||4487//4506||1879/1867|
|Int. Term Up (Resistance)||18,352||5,231||2,134|
|Int. Term Down (Support)|| 15,651/
/15,370 /14,688/ 13,377
|4,506//4,116/ 3,986/3294||1,867/ /1,560|
|Long Term Up (Resistance)||18,352||5,231||2,134|
|Long Term Down Fibonacci Support||50%12,000 62% 10,750||50%2,958 62% 2,555||50%1,390 62% 1,177|
|10Treasury 2.07%||Gold 1,178||Oil 46.05|