There are likely to be fits, starts, and some head fakes, and that explains the changing market sentiment from week to week…until a FED pause
Kristina Hooper, Invesco Chief Strategist
Uh, no Kristina it does not. This quote shows that Kristina has no investing strategy or system. She puts 60% in stocks and 40% in bonds and hopes it does not blow up. In 2022 it did.
We have a system prescribed by Ralph Elliot in the 1930s. This identified major tops in all indexes between November 2021 and early 2022. The markets dropped into June and rallied into August. That comprised Wave One and Two. Wave Three part one, dropped into October. Its second phase lasted until this past week, probably finishing Tuesday. The Santa Claus rally came early and is now ended. As I write Friday, the DJIA has dropped around 1,800 points this week, quite a kick-off to the third of a third wave. Please refer to tinyurl.com/ywe7dsfh for a detailed discussion and illustrative charts.
The bear market has convinced ‘long term investors’ there is little to worry about. No doubt many reading this will note the DJIA returned to 34,859, not far from the November 2021 high. But the internals are far weaker now. At this elevated level, it takes eight columns in the WSJ to list the new lows versus two columns for the new highs. This is a classic divergence of a few stocks holding up the index while others have left the stage. The volatility index has already jumped from 19 to 23 this week. The next low in stock prices is not expected until March, 2023. Expect the October low around 29,000 to be taken out before that date.
Interest rates are inverted, the two-year note yields 4.23% while the ten year is at 3.49%. This is a reliable forecast of a recession and an indication rates are headed higher.
Europe is struggling to a place a $60 cap on what it pays for Russian oil. And it is hustling to build out LNG ports as a result of its rejection of nuclear and carbon fuels. Energy stocks have risen with the market but are also now falling. The world seems to be re-thinking the mad dash to all electric vehicles by 2030-2035.
We are planning other media such as podcasts to better keep all our readers as informed as possible. We hope you have found these columns to be informative and useful in this time of change.
