The S&P 500 stands as the final major index to surpass its all-time highs. The remaining horizontal line linked to price history is at 4818—the intraday all-time high recorded two years ago on January 4, 2022. Currently, the S&P 500 maintains robust health. In the chart’s lower panel is my preferred gauge of market breadth, Net New Highs. This metric reports the number of stocks reaching new highs versus those making new lows across the NYSE and Nasdaq markets. This measure of breadth has remains consistently positive during the best market rallies.
Given the prevailing positive sentiment across markets, stemming from the widespread advance since November, I speculate the likelihood of a healthy correction as the next probable move. To assess this, I will closely monitor market breadth, utilizing it as a key factor in evaluating the probabilities of whether the anticipated correction is likely to be healthy or potentially more severe.
A mere two
weeks ago, the S&P 500 ETF SPY experienced its largest inflow ever.
This encapsulates the current state of the S&P 500—a market
teetering on the brink of all-time highs, with both retail and
professional market participants joining with unwavering enthusiasm— the
metaphorical “everyone is in the pool” moment.
The leading observation for my initial 2024 thoughts that the market is ripe for a healthy correction is the condition of market sentiment, and equity exposure. For over a month now the CNN Fear & Greed Index has reported a market operating in greed, Extreme Greed for the last two weeks.
The NAAIM Exposure Index measures US equity exposure among active fund
managers reported the highest reading for the year, the highest since
November 2021. (The Nasdaq peaked in November 2021, and the S&P 500
just over a month later in January 2022).
The following chart of the S&P 500 marks the relative peaks
in sentiment and equity exposure using the CNN Fear & Greed Index
(marked by red arrows) and the NAAIM Exposure Index (marked by blue
arrows). It is a clear observation that the combination of excessive
greed and elevated equity exposure have preceded all meaningful declines
since the 2022 peak. I do not think it will be different this time.
To end last week’s note I summarized this chart as presenting a compelling argument for selling into greed— I still feel this way. Momentum
has propelled the market through the year, however this is recently
being subtly being interrupted. In the lower panel of the chart is the
Percentage Price Oscillator. This oscillator offers a quick insight into
trend momentum. The red dots within the panel signify negative
crossover events, a slowdown in momentum.
In
my analysis, momentum interruption occurs when the initial negative
crossover is not succeeded by a corrective price move. Instead, price
continues to climb with successive negative crossovers, creating a
pattern of interruptions. Based on my observations, the decline that follows such an interruption cycle tends to erase most of the earlier advance.
The previous instances of momentum interruptions in August 2021
and July 2022 exhibit an intriguing resemblance to the current
scenario, with the index rallying approximately 5% as momentum
decelerated. In both cases, the subsequent decline erased most of the
earlier advance. A comparable outcome today would potentially bring the index down to 4550. In
my analysis the immediate term has the signals flashing caution towards
a 5% decline. If this scenario unfolds, the speculated decline will
initially be favored as being one of health that sets the index up for
an additional leg higher. I speculate the correction will have the S&P 500 trade between 4500 - 4600 in the near term. Should this unfold, it will initially provide a healthy technical appearance where price revisits the breakout area.
The interest rate changes in the United States trigger international capital movements, which are reflected in the Dow Jones Index, an indicator of such movements. To predict future economic conditions, understanding the trends in U.S. interest rates and the Dow Jones Index can provide insights into both the U.S. and global economies. To
comprehend the economic situation from 2023 to 2024, it's observable
that the patterns of interest rates and Dow Jones Index during 2006-2007
are similar. The period when the U.S. continuously raises interest
rates and then freezes them, leading up to a rate cut, is known as the
'Goldilocks' period, which is typically a phase of a major bull market
in stocks.
To aid your
understanding, I have specified concrete dates.
Think of these as
reference points, focusing on the patterns and the dates surrounding
them.
When
interest rates are frozen consecutively three times (Point (d)), the
market gains confidence that there will be no further rate hikes.
Similar to 2006, when three consecutive rate freezes led to breaking
historical highs, the same pattern was observed on December 13, 2023,
breaking the historical high of January 4, 2022 (Point (f)).
The peak of the U.S. economy is predicted to be on May 8, 2024, with the U.S. stock market artificially creating a peak for about six months (until the first rate cut). The global economy, with the decline of the U.S. dollar, moves towards a strong bull market in individual countries. The magic of exchange rates creates opportunities for profit through currency differences and stock appreciation, leading to a surge in global stock markets. Global and U.S. stock markets are expected to start declining simultaneously around November 15, 2024 (just before the U.S. rate cut). At this point, the U.S. economy would have been declining for about six months from its peak, while the global economy, excluding the U.S., remains stable.
I believe there are signs of a weakening U.S. economy, which will lead to the start of interest rate cuts by the end of 2024. Eventually, about a year later on December 12, 2025, both the U.S. and the world will face an economic crisis. The peak of the U.S. economy is expected in May, while the global economy is predicted to peak in the second quarter of 2025 [...] I hope you too can achieve favorable outcomes during this time.
(1. - 4.) On August 2, 2023, through my posts, I predicted the breaking of the historical high of the Dow Jones Index and the freezing of U.S. interest rates (the Goldilocks period). I forecasted the peak of the stock market, the timing of the economic crisis, and all phases up to the great depression in 2032. By looking at my past Twitter posts, one can see that the results are following the same patterns exactly as predicted. My posts will be helpful to understand these patterns:
The S&P 500's average annual return during Election Years is 11.6%. Since 1833 the fourth year in the Decennial Pattern has been up 13 vs 6 times down with an average annual return of 5.22%. Over the past 30 years,
January gains have occurred 17 times (57%), while losses numbered 13 (43%), barely better than the flip of a coin. In bull markets, New Moons are bottoms, and Full Moons are
tops. In bear markets, New Moons are tops, and Full Moons are bottoms. More often than not,
stocks will rise from around the 7th to around the 14th calendar day of a month, fall
from the 14th to the 20th, and rise from the 20th to the 25th.
In 1967 Yale Hirsch published the first Stock Trader’s Almanac and presented theFour Year Presidential Election Cycle
as an significant and predictive indicator of stock market performance.
The outcomes are relatively steady, regardless of the president’s
political leanings in office at the time, and the year after each
presidential election marks the start of a new four-year stock market
cycle. Considering annual returns of each year in the four year cycle,
the Pre-Election Year (2023) is considered best, and the Election Yearsecond. The most predictive period of the year is November 19th to January 19th. Wayne Whaley coined it a 'Turn of the Year (TOY) Barometer'. If the return of this 2-month period is greater than 3%, a bullish
signal is given, and the market is very likely to do well over the
following 12 months. If the return is 0-3%, the signal is considered neutral; and if the return is negative, the signal is bearish, and returns very poor. Currently the S&P 500 still trades some 6% above the November 19 level.
The 250 year US empire live cycle concluded in 2023. Demise by folly overstretch. Uni-polar global supremacy is over, and Russia, China and Iran stronger than ever. A multi-polar world of worlds now knows how to deal with a paper-tiger gone mad. All star-spangled striped monsters check-mated, defeated and unveiled 24/7 along the many battle fronts on the globe. Project Ukraine lost. Now supervising genocide in Palestine. Yemen's Ansar Allah controls the Bab al-Mandab and launches full front attacks against the hegemon. An emerging Muslim alliance will liberate the Holy Land. Iran may shut down the Gibraltar strait any moment. The Taliban will enter Jerusalem and flatten Tel Aviv. Zionist Saudis and emirs doomed. Revolutionary Shia will root them out. The fever pitch increases. As some discard all this as hysteria and Islamist war propaganda, the dollar hegemony is rapidly melting away under the world island's rising sun. 2024 will be a remarkable 'election year'. W.D. Gann projected 'major panic, breadlines, soup kitchens, despair, and unemployment' into the US of 2024. And US astrologer L. David Linsky sees the home-front ready for more mayhem, upheaval, war and regime change. Plenty of opportunities along the lines and times in the above seasonal roadmap for 2024.
The Kitchin Cycle and the Benner Cycle are bullish for all of 2024 and 2025 (historically the fifth year outperforming all other years in the decennial pattern). In the current decennial cycle Larry Williams identified June 2024 as "the sweet spot with 90% accuracy" to buy stocks until December 2025.
In bull markets, New Moons are bottoms, and Full Moons are tops.
Jan 3 (Wed) 22:30 = 270° = Last Quarter Jan 11 (Thu) 06:57 = 0° = New Moon Jan 17 (Wed) 22:52 = 90° = First Quarter Jan 25 (Thu) 12:53 = 180° = Full Moon
Define the Grinch Barometer as the S&Ps performa over the 3 trading days before and after Xmas (6 days). Stay tuned for Grinch spottings.
Since
1950, a negative Grinch has been followed by a positive January in 16
of those 19 years (average month = +4.3%) and a positive calendar year
in 18 of those 19 cases (average year = +19.4%). To the contraire,
eleven of the 12 S&P double digit loss years since 1950 followed
positive Grinch’s.
kept steadily rising for six week and closed at 858 last Friday. No reversal.
The High Low Logic Index (last Friday = 1.467) indicates no reversal and that the NASDAQ is nowhere near a major top yet. Every major high since 2000 happened only after the logic index had reached 1.92 or higher prior to the top: 2000 = 1.92; 2007 = 2.01; 2015 = 2.18; 2018 = 2.05; 2019 (2020 crash) = 2.17; 2021 = 2.09.
Dow Jones Industrial Average (daily bars)
However, the DJIA now closed the sixth week / the 27th trading day above the 9-day moving average a.k.a. the market maker re-balance level within all different weekly range templates. Not sure when this happened last time. All the shallow consolidations during the past four weeks occurred around the 3-day moving average only. Spectacular. Meanwhile the S&P 500 and the NASDAQ consolidated last week around the 9 DMA into Thursday before taking out the previous weeks high once again - but by some points only. Nasdaq actually printed lower weekly lows and closed on a lower high. What goes up will come down again to 50%+ levels - sooner or later. Next Monday, December 11, the DJIA will open the seventh week / the 28th trading day above the 9 DMA. Impressive outside fourth quarter range on a new 2023 high. The S&P 500 touched the July 27 yearly high to the pip but did not break to the upside. Lagging behind the other two major indexes by at least a single pip. Quite fantastic. Monday, December 10, will be 45 solar longitude degrees away from the November 27 major low. Tuesday, December 12 looks like aNew Moon and 'Sensitive Solar Degree' December high. Saturday-Sunday, December 16-17 is a turn day in the geocentric Bradley Siderograph and should mark a low in US stocks.
Seth Golden (Nov 25, 2023): The Trifecta of Overbought Conditions: 92% of SPX above 20-DMA, highest in 2+ yrs McClellan Oscillator > 80+ S&P 500 2 std. above 50-DMA (RSI also 70+)
Four weeks+ of price expansion beyond daily, weekly and quarterly levels. Last week narrow daily and weekly ranges. Multi-month inflation melt-up? Possible. Allen Reminick suggests a creep up into November 27 (Mon) or December 1 (Fri) followed by some rather shallow 23-50% move down into December 8 or mid-month, some X-mas rally, sideways into January 12 and up into March-April 2024. Possible. [ Allen Reminick (Nov 20, 2023) - S&P 500 Projection Into June 2024 ]