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 industrials 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 forecasted 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 2.11%||Gold 1,158||Oil 49.75|