Loading ...Laying The Groundwork For Powell & Stock Market Top
Today’s stock market decline is no surprise after going straight up since the Aug. 5th reversal bottom. The boys are laying the groundwork for Powell’s speech tomorrow. Whatever he does or doesn’t say, the stock market is likely to rally strongly for at least, one more day.
Ideally, we would like to get an old fashioned, “Joe Granville sell signal.” That would be triggered if the DJIA makes a new high while the S&P and NASDAQ fail to do so. The market is ready to head lower soon anyway, as this bounce off the Aug 5th bottom was long in the tooth. If the market does give the sell signal tomorrow, or in the next 3 days or so, it will play into another important event next week. More on that in the days to come.
The model I recognize and think is most likely as laid out by Dan Oliver in his 2 years to bust piece written in Aug 2023 allows for the market to continue its rally into early next year. Shorts likely need one more squeeze em rally to exhaust them and allowing the trap door to open. Meanwhile the everything rally continues to include the PM group. Next years contraction decline could spank every sector. That’s how I am running my book.
I wonder if the rally will last that long, but your scenario seems very likely to me. Next year is going to be a shit show for the economy.
With you across the board on this. That is how my charts are best lining up ATM (ie, Q1), provided that other clues suggesting a major top lies directly ahead turn out to be accurate. Some — who are quite emphatic — see an Oct top. Crazy Ivans are possible, but I can’t anticipate those, so I don’t try.
Assuming the Fed doesn’t act on QE until the bond market blows up, why should stocks go down in nominal terms, much less crash? I mean, if bonds and USD are tanking, what really is the alternative besides equities generally?
This is a bit of a hot take, but I think the US market is likely to continue rising in nominal terms because it is discounting the end of USD reserve status. Gold and the miners will go up multiples of what the stock market achieves from here.
What precipitates a crashing stock market? Systemically, redit risk is literally zero thanks to the Fed.
“Credit risk,” that is.
I didn’t see anyone use the word crash, except yourself. My post said if we get the technical divergence I discribed it would be a SELL signal. That could result in one of three possibilities. The start of a bear market, or a correction or possibly a crash, although I didn’t specify any of the three. Your post above about yields going a lot higher could be the answer to your question? Although I am not looking for yields to go much higher in the near term because the economy is weak and getting weaker. Down the road higher yields do become likely.