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The Problem With Modern Monetary Theory

The Problem With Modern Monetary Theory

Modern monetary theory has been…

Market Sentiment At Its Lowest In 10 Months

Market Sentiment At Its Lowest In 10 Months

Stocks sold off last week…

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LET'S LOOK AT SOME OF THE SHORT TERM TRENDS

THE FIRST TREND IS THE FTSE 100

You can see the first move up after the last low was a 7 days fast, this was followed by a three bar counter trend move against the trend. Remember the normal counter trend in a fast trending market is one to four days, so as long as the counter trends can hold to those trending criteria we an assume this fast trend is intact. Because of the nature of the intermediate term trend and the short term trend since March, I thought the highest probability is this would be an exhaustion style of trend. Not only in this index but the DAX, CAC 40 and the S&P 500 indexes also. The next counter trend was one day after hitting the obvious resistance of the Old High, indicating the trend was getting a bit faster than it could maintain. This was followed by another 3 bar counter trend and the start of a consolidation or congestion. Notice there was a one day rally that failed, but the follow through to the downside has not been characteristic of trending down so the trend appears to be consolidating the previous fast move and will likely make new highs after completing this consolidation but a scary down day or two is possible since the other stronger indexes are vulnerable to a counter trend Friday into next week.

NOW LET'S LOOK AT THE S&P 500 DAILY CHART

This index has a high probability, when in exhaustion style of trends, to run 90 calendar days and that is my forecast. You can see the index has held to fast trend criteria but is due for a congestion or consolidation of the trend so it can run out a full 90 day block in time. Most markets need to consolidate fast moves with counter trends and little sideways consolidation. It looks like that could start today or within the next few days. It still looks like up into June 12th.

NOW LET'S LOOK AT A DAX WEEKLY CHART

This is indicative of many stock indexes and also replicates the Dow Jones 1946 bull campaign, which is a great roadmap for this bull trend. There are certain patterns of trending that are undeniable and this is one of those. Markets exhaust into highs. You can see the previous exhaustion had 3 ascending trendlines and that is the pattern to indicate an exhaustion of the trend. That exhaustion only brought in a ¼ retracement, which kept the trend in a strong position for the next rally. This is now operation on three ascending trendlines and the last one is vertical. This last leg will last 90, 120 or 135 calendar days and then the entire bull campaign will carry a risk of being complete at that time. Look at the vertical nature of this last 7 weeks.

We'll look at gold next report as it has three weak drives below a spike high and that is when it will make up its mind to reverse of trend up.

 

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