Pull the trigger with confidence.

Since the early 1990s, there has been a pretty good correlation between the movements of the DJIA and the spread between the 10-year U.S. Treasury yield and the equivalent yield for German sovereign debt.  The German bonds are commonly referred to as “bunds”, shorthand for the German word “bundes”, meaning federal. 

This Treasury-Bund spread also has the interesting property of giving us an early warning of major secular tops in the U.S. stock market.  When it rises up to a very high level,... Read More

The FANG stocks have been leading the market higher in 2018, and a lot of traders are choosing to tag along on that trade by buying into QQQ, the ETF which tracks the Nasdaq 100 Index (NDX).  As more traders buy into QQQ, the sponsoring firm (Powershares, part of Invesco) issues more shares in order to keep the share price as close as possible to the net asset value.

This week’s chart shows how the number of QQQ shares outstanding varies over time.  Not surprisingly, it goes up and down in... Read More

10 years ago in June 2008, oil prices were making a top above $140/barrel, which turned out to be an exhaustive blowoff top.  A steep collapse ensued, taking oil prices down to below $40 in January 2009. 

Crude oil gives us a 10-year leading indication for what the stock market is going to do.  It is a phenomenon which has only been working for the entire 122-year history of the DJIA, so that may not be long enough yet for some people to believe in it.  Making things more complicated, it is... Read More

For a few years now, I have been employing lumber prices as a leading indicator for what the homebuilding sector of the stock market would do, and it has worked pretty well.  But lately the correlation is broken, with housing stock prices falling even as lumber said they were supposed to continue trending higher.  So it’s time to reevaluate the hypothesis about lumber giving a leading indication.

In the past, I have found that a lag time of just over a year worked to show how the HGX’s... Read More

If this were a “normal” 2nd year of a presidential term, we would now be in a corrective period due to last until just before the mid-term elections.  But as many in the press have noted, we do not have a “normal” presidency, and the market is not tracing out a perfect normal pattern. 

Years ago, I first constructed a Presidential Cycle Pattern by averaging together multiple years’ worth of data on the SP500.  One difference I chose to make in this process, versus the work of others, is... Read More

Back in January, I introduced readers to the revelation that all throughout 2017, the DJIA had been following in the footsteps of Bitcoin prices, with a lag time of about 8 weeks (56 calendar days).  And it continues working even now, albeit with a slight adjustment.

Why would this relationship work?  My answer is that there are cycles of human emotion which affect our collective attraction to and repulsion from speculative investments like the stock market.  It appears that those same... Read More

The ratio of gold prices versus silver prices is now up to the type of high reading that in the past 2 decades has marked an important low for both gold and silver prices. 

The value of anything is always and in every case a ratio.  Most often the units are expressed as dollars per ounce, dollars per bushel, dollars per share, etc.  But expressing the price of an ounce of gold as being equivalent to 80 ounces of silver is perfectly legitimate.  We can understand the implications of the... Read More

If you are a gold investor, then the one thing you want most is rising deficits.  Luckily for you, Congress appears to have granted just what you want.

This week’s chart compares the trailing 12-month federal deficit (as a percentage of GDP) to gold prices.  The correlation is not perfect, but it is pretty good over time.  The implication is that rising deficits should be bullish for gold prices.

That certainly was the case during the 2000s, following the supposed surpluses of the late... Read More