Was the biggest week of the year a non-event? There is no such thing as a non-event because they don’t ring a bell in financial markets. You have to put your detective cap on to figure out what the market is trying to tell you. The market is like my black lab Sydney. She rolls over in a certain way when she wants something. It’s up to me to be smart enough to figure out what that is. The market is the same way. It doesn’t speak English but if you tune in well enough you’ll get the idea.
The bottom line is we are close to confirming a longer term bull market off 2009 but a couple of technical conditions short. But let’s talk about the NDX, NASDAQ and Russell for a minute. These have taken out 2007 highs. That means they are up for 9 years overall. What would you call that? Now I know the banks aren’t even close and that’s really what counts. But as I told you before, markets bottomed in 1975 and we suffered 7 years of the misery index before it remotely felt like a bull market. What people don’t realize is the early stages of a bull market, people don’t think it’s a bull market and that’s what makes it a bull market.
There are still no sell signals in the stock market, even with a 2+ year rally. It was only a week ago that Pisani told us of the disconnect between the good stock market and the lukewarm economy. One has little to do with the other but the idea is that sentiment is NOT euphoric if they are worried about the economy. At the rate we are going now, the economy will be doing much better within 6-8 months because it takes that long for the chart to be felt on Main Street. IF the stock market is still going up, you may THEN experience some euphoria because true euphoria hits when the market is going good and people on the local level start feeling good and participate. That’s one aspect of this market people fail to understand. Markets put in long term tops when the public gets involved. The public is not involved here and may not be for a long time. But all is relative and at some point this year there might be enough of the public, even if it’s a little to get some euphoria. But unemployment is way too high. While housing news appeared to get better a good chunk of housing sales comes from foreclosures and short sales. That’s not economic prosperity in my book. If you really stop and think about it, the economy can overheat this year because everything is relative but in no shape or form will the housing market be recovering this year or even next year. You need good J-O-B-S for that to happen.
While I’m on the subject of jobs, an article in the April 20 Arizona Republic highlighted the fact that McDonalds was hiring 1000 people in my state and 50,000 nationally. These are jobs designed normally for high school kids and you had people from all many walks of life applying for them. Now we have the structurally unemployed trying to find jobs flipping burgers. This is very serious and I want you to think about this. How can housing possibly ever get to a normal footing when one of the headlines is for job creation at McDonalds? Unless we go through another period where they don’t check the paperwork, how are minimum wage people going to qualify for a mortgage? If they can’t qualify, why build houses? If they can’t or won’t build houses then all of the good paying construction jobs from carpenters to plumbers to electricians won’t exist. That trickles down in a local economy. People working at McDonalds generally are not in a position to buy stocks. So while the stock market is doing well, my point is I don’t see the kind of euphoria or public enthusiasm that we saw in 2000 or 2007 for a long, long time.
So when I look at these charts and see an SPX that breaks out from a bear channel and it’s NOT accompanied by the kind of euphoria we normally see like in 2000 or 07 I can understand why we are on the cusp of confirming a secular bull market.
Markets had an opportunity to turn on last week’s window and did not. So let’s look at the last real technical guard at the gate.
The Yen contract AND the USD-JPY have violated what I call the A wave tendency line. That was a line which ended the first phase of the intervention and was near term support or resistance as the case demanded.
Now these lines have been tested (similar lines in the USD-JPY) and violated again due to Dollar weakness.
What that means is the intervention of a month ago is on the cusp of failing. You can see it on this chart where the 608dg line after the first phase of the project has been violated. It’s close to being an action/reaction problem because a little higher can go a long way to getting this right back to the top. And if that happens, you know the culprit is the Greenback.
You know we’ve been tracking the long term Dollar which violated the quarter lines on the channel. We are clearly deeper into the channel a week later. So is it hopeless? Last week sentiment was as one sided as I’ve seen it at all the recent Dollar bottoms in the last 3 years. Pundits stated the Dollar trade was the easiest money they can remember and Bertha Coombs mentioned in one of her morning updates that the Dollar was getting “crushed.” As bad as that sounds, and it’s bad, they don’t talk about the Greenback in those terms very often. So sentiment is where it needs to be. We are also on the back end of a 233 day window in both the Greenback and EUR-USD. We know there is an inverse relationship to equities. If the Dollar doesn’t turn up here I’m not exactly sure what can do it because technical conditions for a high in the stock market were present last week and from the information we have now, it appears it elected to pass.
Finally, China spent a down week but is on the cusp of turning back up at key support and the Nikkei also cleared above month long congestion on the 261 day window off last April’s high. What about the inverse relationship to bonds? We look to median lines as important support and resistance lines. But once those lines are crossed, behavior changes as well. In this case, once the price action cleared above our long term bear channel line, the market got over its allergic reaction to higher bond prices.
This week? Let’s see what the currencies can do, they appear to be the last guard at the gate.
Click charts to enlarge
Jeff Greenblatt is the author of Breakthrough Strategies For Predicting Any Market, editor of the Fibonacci Forecaster, director of Lucas Wave International, LLC. and a private trader for the past eight years.
Lucas Wave International (https://www.lucaswaveinternational.com) provides forecasts of financial markets via the Fibonacci Forecaster and other reports. The company provides coaching/seminars to teach traders around the world about this cutting edge methodology.