Here’s something we don’t see every day, the Dow Jones correcting over 10% in just nine trading days (January 26th to February 8th), then snapping back 5% in the next five. And the violence of the 10% decline, seen in Mr. Bear’s report card below is remarkable.
From February 2-8 the NYSE saw seven extreme market events out of a possible ten; three NYSE 70% A-D Days and four Dow Jones 2% days. A five day bear-market feeding frenzy like this has happened only during the Depressing 1930’s or in the Sub-Prime Mortgage bear market.
But it’s been a week now, so I guess it’s all over and we’re back to normal.
Actually, all this is very weird and demands comment. Especially as the beginning of the correction happened when President Trump declassified the House Intelligence Committee’s memo on the FBI’s illegal wiretapping of Donald Trump’s electronic communications that everyone in the mainstream media claimed for over a year and a half never happened. But now that the FBI and their minions in the media can no longer deny it, they now claim the public acknowledgement of this now long denied truth would damage national security.
This too is weird: seeing Friday, February 2 down by 666 points (the Mark of the Beast) seemed to be someone sending someone else a personal message; Wall Street to Trump – we can hurt you so back off.
Here’s the Dow Jones plotted with its 52Wk High and Low lines. The 10% correction can hardly be seen in the chart below, and a week later the bulls took back half of their losses. Makes one wonder why the stock market went down in the first place. I wouldn’t be shocked seeing the Dow Jones making new all-time highs again by early March.
The top 20 in the Dow Jones Total Market Group (DJTMG) closed the week at 51. That’s what I like about this indicator; its superb ability to ignore transient moves in the market. When the top 20 moves up, down and especially changes its direction, something big is going on. As I read it at week’s close, nothing fundamental has changed in the stock market. So I’m expecting the market to resume its advance in the weeks to come, and will until the top 20 turns down in earnest.
That’s not to say the stock market’s latest 10% correction didn’t affect the DJTMG’s top 20; it did, as seen in the frequency table below. Barron’s January 29th issue saw the Dow Jones’ last all-time high, as seen in the distribution of the groups in the top 20 (BEV-Zero to the -15% columns). In the following two weeks the migration towards the right (deflating prices in the groups) is very evident, but took the top 20 down by only one group. And this week’s recovery (Barron’s February 19th issue) is also notable in the table, but left the top 20 at 51.
Well established market trends, such as the post November 2016 election advance continue on until they no longer do. Seeing the many groups above once again migrate towards the left (inflating market prices) in the past week strongly suggest that this is still a stock market that wants to go up. So I’m still short term bullish on the market, but remain a long-term grizzly bear.
This is not the time to fall in love with the stock market. Wait until you see only zeros in the table above before you even consider doing so. When will that happen? At the bottom of the next bear market. In Barron’s March 9, 2009 issue, the bottom of the credit-crisis bear market, this row in the table was all zeros down to the -25% column, with only 5 in the -30% column. I expect the next bottom will prove to be even deeper.
What do German Sovereign Bonds have in common with US Treasury Bonds? Yields for both bottomed in the summer of 2016 and have been rising since. There is another common link between these markets; both markets saw their bond yields collapse in the wake of the sub-prime mortgage crisis.
Well why not? The Japanese Sovereign bond’s yield fell on the news of the Fukushima nuclear reactor meltdown. Never doubt “policy making” is a global collaboration, and all central bankers are connected together at their balance sheets.
This being true, “policy makers” everywhere would be pulling the hair out of their scalps at the very thought of President Trump supporting:
“Controversial legislation to subject the Federal Reserve’s monetary policy powers to outside scrutiny is getting new life in Washington.”
– The Hill 01/04/2017
This article is a year old, and a Google search shows similar articles from last summer. I wish I had something more recent, but I expect auditing the dark heart of “monetary policy” is high on Trump’s agenda when he finally gets some of Washington’s swamp creatures out of his way.
Now on to gold’s BEV chart. Market action in the gold market is like watching paint dry, but that’s much better than what we had to watch from August 2011 to December 2015 below. Currently gold is in an uptrend that’s now into its third year, and that sounds, and looks darn good to me.
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