Pull the trigger with confidence.

Four years ago we had a remarkably similar market price action to this year’s.  And that makes no fundamental sense, since all of the factors which should matter are different.

Four years ago, the Fed was still doing QE3.  That program was winding down, but in October 2014 the Federal Reserve still added another $24 billion to its balance sheet.  Contrast that to October 2018, when the Fed is unwinding its balance sheet at a stated rate of $50 billion per month.

Four years ago, the U.S.... Read More

We are now in the period of bullish seasonality.  And we are just about to enter the bullish 3rd year of the current presidential term.  So all signs should be starting to point upward now, after the normal weakness of a presidential term’s 2nd year. 

One problem is that we have not seen that normal 2nd year weakness.  Another problem is that just as things are supposed to start getting stronger, there are signs of weakening internals.  Among the most troubling of these signs is an A-D Line... Read More

The stock market has been doing something peculiar lately.  In an obvious uptrend, we are starting to see an increasing number of NYSE-listed issues making new 52-week lows.  When the number of New Highs (NH) and New Lows (NL) both exceed a certain threshold on the same day, coupled with some other criteria, that is known as a Hindenburg Omen.  And what we are seeing lately is a very large cluster of them in a short time span, a behavior that tends to have more importance than a lone signal... Read More

Old-school monetarists have longed for a return to having gold as the real reserve currency.  So here is a fun quandary: suppose you’re a hard-core auriphile, longing for a return to gold being the world’s reserve currency.  Suppose you could get what you have longed for, but with a price: China gets to call the shots.  Do you accept the deal? 

This week’s chart shows that the movements of gold prices are pretty tightly tied to the movements of the Chinese yuan.  So if gold prices are ever... Read More

One of my favorite predictive models had me looking for a decent selloff in the summer of 2018, but the U.S. stock market decided not to participate.  So what happened?

The model in this week’s chart contains data from the weekly Commitment of Traders (COT) Report, published by the CFTC.  This data is on the eurodollar futures contract, the most liquid and widely traded of all futures contracts.  I should emphasize that in this context, the term “eurodollar” is not a currency futures... Read More

Every chart of price data is a depiction of a ratio.  If you look at a chart of your favorite stock, what you are really looking at is the ratio of the value of your stock to the value of the dollar, since stock prices are quoted in dollars.  AAPL recently was at 226 dollars per share.  Gold recently is at 1200 dollars per ounce.  Every price is a ratio. 

But you don’t have to have currency in a ratio.  The value of the DJIA is an approximation of dollars per something; I won’t discuss the... Read More