Today’s Market Comments:
Interesting Day today, Wednesday, March 21st, 2018. Stocks were up intraday, then closed down, apparently not liking what the new Fed Chair Powell had to say as he increased short-term interest rates a quarter percent, and then justified why this was a good idea for 35 minutes.
Stocks formed a Shooting Star candlestick pattern Wednesday, evident in the Industrials, S&P 500 and the NASDAQ 100. See charts on page 27. This pattern is often seen just before declines.
The Fed is raising short-term interest rates and that means it is pulling money out of the economy to effectuate this rise. Further, the Fed remains committed to Quantitative Tightening, which means it is selling billions monthly and trillions annually of securities from its balance sheet, to the economy, in exchange for cash. In essence, the Fed is pulling an aircraft carrier load of money from the economy with both hands. This is a simultaneous tightening from two different tools it has. This means there is less money to pour into stocks, to invest in capital goods, to grow the economy. The Bull market from 2009 was largely fueled by Quantitative Easing where the Fed bought securities and pumped cash into the economy. Now it is doing the opposite, which should be a strong tailwind for declining stock prices in 2018 and beyond.
The question is, has that declining trend begun, or is there one more rising trend for the Bull market, wave v-up to complete the Bull market from 2009? There are two valid scenarios right now, the first being a sideways triangle is underway for wave iv down within the rising trend from 2015, which is not complete, but is next looking for a decline to 24,000 in the Industrials and 2,600 in the S&P 500 at this time to finish its middle subwave c-down, with d-up and e-down to follow to finish the triangle and then wave v-up would follow, a strong rally leg.
However, it is critical that stocks not drop below those levels, because if they do, then scenario two is unfolding, that the Industrials and S&P 500 will have dropped out of the long-term rising trend-channel from August 2015, which would mean the next major Bear market has likely started and a crash could be starting. See charts on pages 28 and 30.
To make matters worse, we got another Hindenburg Omen observation today. There is already an official H.O. signal on the clock warning that a potential stock market crash could occur over the next several months. All crashes in the past 30 years have occurred when an H.O. was on the clock. The other way of putting it is if we did not have an H.O. on the clock, we did not see any crashes over that time period. So, we could say that stocks are in a yellow alert period at this time.
Gold has formed two Bullish price patterns, both with upside price targets of 1,600. It has formed a Bullish Ascending Triangle as well as an inverse Bullish Head & Shoulders bottom pattern. We show charts for both patterns on page 32. These patterns may need a bit more downside to finish before the uptrend begins. Miners and Silver should follow Gold.
Our Blue Chip key trend-finder indicators moved to a Sell signal March 14th, 2018 and remain there Wednesday, March 21st. The Purchasing Power Indicator component triggered a Sell signal Wednesday, March 14th. The 14-day Stochastic Indicator generated a Sell on March 8th, and the 30 Day Stochastic Indicator generated a Buy on March 14th, 2018. When these three indicators are in agreement, it is a short-term (1 week to 3 months’ time horizon) key trend-finder directional signal. When these three indicators are in conflict with one another, it is a Neutral (Sideways) key trend-finder indicator signal.
Our intermediate term Secondary Trend Indicator generated a Buy signal Wednesday, August 30th, and remains there Wednesday, March 21st, rising 4 points Wednesday (out of a possible 9 points), to positive + 18, needing to drop below negative -5 threshold for a new Sell.
Demand Power fell 2 to 397 Wednesday while Supply Pressure fell 1 to 386, telling us Wednesday’s decline in Blue Chips was weak. This DP/SP Indicator moved to an Enter Long Signal Thursday, March 8th, and remains there Wednesday, March 21st, 2018.
The Plunge Protection Team Indicator moved back to an “OFF” signal on March 21st, which means the PPT is not as likely to support the markets while this indicator remains on an “OFF.” This means there is not likely to be significant government intervention at this time, or if there is it will not be effective. This indicator is designed to identify high probability periods where the PPT will be supporting, or buying the stock market (when it is on an “On” signal) and when it moves to a Neutral or Off signal (formerly called Sell), it does not mean the stock market will decline, it means the PPT’s interest in buying the market is off rather than on, and market forces outside the PPT are more likely to determine stock trends up or down. In other words, a Neutral or Off signal means the odds are higher that the PPT stands down or has little influence on price trends.
Caution: I would not bet the farm on a Crash. Crashes are rare and maybe the pattern will morph into something we presently do not see that is less ominous. Risk must be managed. Maybe the Fed buys the entire stock market, who knows given their track record. Maybe a black swan event is postponed several months.
Gold and Miners rose Wednesday, March 21st. The internals for Miners are strengthening. They moved to a Sideways signal Tuesday, February 27th, as the HUI 30 Day Stochastic triggered a Buy signal February 14th, and our HUI Purchasing Power Indicator generated a Sell on February 27th. When these two indicators are in agreement, it is a directional signal, and when at odds with one another, it is a combination neutral signal. On February 2nd, the HUI Demand Power / Supply Pressure Indicator moved to an Enter Short signal. On Wednesday, March 21st, Demand Power rose 9 to 398 while Supply Pressure fell 6 to 411, telling us Wednesday’s HUI rise was strong.
DJIA PPI flat at 61.75 on a Sell
DJIA 30 Day Stochastic Fast 36.67 Slow 45.33 On a Sell
DJIA 14 Day Stochastic Fast 26.67 Slow 35.00 On a Sell
DJIA % Above 30 Day Average 36.67
DJIA % Above 10 Day Average 23.33
DJIA % Above 5 Day Average 30.00
Secondary Trend Indicator Up 4 to Positive + 18, On a Buy
Demand Power Fell 2 to 397 Supply Pressure fell 1 to 386 Buy
McClellan Oscillator rose to negative -32.02
McClellan Osc Summation Index + 1655.02
Plunge Protection Team Indicator – 12.71, on an “OFF”
DJIA 10 Day Advance/Decline Indicator -23.1 on a Buy
NYSE New Highs 69 New Lows 136
Today’s Technology NDX Market Comments:
The NDX Short-term key Trend-finder Indicators generated aSideways signal Tuesday, March 13th, 2018, and remain there March 21st, 2018. The NDX Purchasing Power Indicator generated a Sell on March 13th, the NDX 14 Day Stochastic triggered a Sellsignal on March 15th, 2018 and the 30 Day Stochastic triggered aBuy signal on March 6th. When all three component indicators are in agreement on signals, it is a consensus directional signal. When they differ, it is a sideways signal.
The NDX Demand Power / Supply Pressure Indicator moved to anEnter Long positions signal Monday, March 5th and remains there March 21st. On Wednesday March 21st, Demand Power fell 5 to 427, while Supply Pressure rose 1 to 421, telling us Wednesday’s decline was mild.
The NDX 10 Day Average Advance/Decline Line Indicator triggered a Sell signal March 21st, 2018, and needs to fall below negative – 5.0 for a new Sell. It fell to negative -8.4 on Wednesday, March 21st, 2018.
NDX PPI Fell 2 to 243.07 On a Sell
NDX 30 Day Stochastic Fast 43.00 Slow 51.20 On a Buy
NDX 14 Day Stochastic Fast 27.00 Slow 39.80 On a Sell
NDX 10 Day Advance/Decline Line Indicator – 8.4 On a Sell
NDX Demand Power Fell 5 to 427, Supply Pressure Up 1 to 421 Buy
RUT PPI Rose 1 to + 177.71 on a Buy
RUT 10 Day Advance/Decline Line Indicator – 0.60 On a Buy
Today’s Mining Stocks and Precious Metals Market Comments:
Our HUI key trend-finder indicators moved to a Sideways signal February 27th, 2018.
HUI PPI Up 4 to 179.27, on a Sell
HUI 30 Day Stochastic Fast 35.00, Slow 26.11 on a Buy
HUI Demand Power Up 9 to 398; Supply Pressure fell 6 to 411, Sell