Monday, December 15, 2014

DJIA 2014 vs 1997

Calculated and charted with Sergey Tarassov's Timing Solution.
For the methodology see HERE

The Stock Trader's Almanac Blog presented December’s typical seasonal pattern pointing to a bottom in stocks this week, possibly Monday, followed by a strong up day and then a nice rally.

Sunday, December 14, 2014

Tom McClellan: Crude Oil's 10-Year Leading Indication for DJIA

Tom McClellan - Chart In Focus (December 11, 2014)

Tom McClellan recently presented a 10-year leading indication relationship between oil prices and the stock market, as shown in the above chart. The current oil price slide says that sometime around 2024 some type of “echo” in stock prices from this year’s oil price drop can be expected. 

Stock prices echoing oil price movements with a 10-year lag has “worked” for over 100 years and there is enough evidence to accept it, even if we cannot explain it. For now, the message of this leading indication is that the oil price rally from 1998 to 2008 has yet to see the full extent of its echo during the 2009-2018 period. While the current dip in oil prices is going to be bad for stock prices about 10 years from now, it is not really a problem for stock prices in real time. 

The following chart zooms into this correlation between the S&P500 and the Crude Oil Price shifted 10 years into the future and suggests the S&P500 would continue moving down next week, then up into end of December before forming a major low around January 6. Another rally into early July - with a correction from around March 20 to April 24 - should follow.

2014 is the 2nd year of the Presidential Cycle and mid-term years are historically some of the worst. However, 2015 - the 3rd year - is the pre-election year and historically the best of the 4-Year Presidential Cycle. Additionally the 5th year of the Decennial Cycle promises to be a strong up year for stocks with a top in late July or early August 2015 (see also HERE).

Oscar Carboni (12/15/2014): The Repricing of Crude Oil vs Dollar Index + Stocks keep Rising = No Crash!

The seasonal pattern of Crude Oil itself has a bottoming period between early December and mid February 2015.