ELAM: Is it a new bull market?

Me, I’m going with the Dow Theory.

Richard Russell author Dow Theory Letters

Today a headline in the WSJ announces, the S & P 500 Starts a new bull market! As this column has noted and the article does mention this is in large part due to a handful of companies posting outsized gains. These comprise the usual suspects of Amazon, Tesla, and Nvidia. The weighted SPX hit a new high of 4,304. The equal weighted SPXEW is 400 points below its February high.

The Dow Theory states the Transports and Industrials both must make new highs to signal a new high or low. Transports are around 1,500 points below their February high. Hence, we do NOT have a Dow Theory signal using the equal weighted Dow. This is ironic considering Charles Dow began the Wall Street Journal. The same paper also declares Europe is now in recession.

It’s been an interesting week. Trump is indicted for having classified documents at his home. This is the first time a former President has been indicted. It seems odd that the DOJ would do this considering Biden is desperate to run against Trump. More legal entanglements make Trump’s nomination less certain. No indictments over payments to the Bidens or Hillary’s e-mail server have been made. These are sure to be discussed in the House.

Thew SPXEW and the price of crude oil both continue sideways. The Saudis cut oil production one million barrels per day but the price has not changed.

The next market worry are loans of commercial real estate. The problem is two-fold. First, workers are not returning to the office post COVID. Firms are already allowing workers to locate where they want or come in to the office say three days a week. The result is that many firms will not renew leases when they come due. The second worry is that amid the low interest environment fostered by the FED, many mortgages became interest only balloon notes. Interest only was paid during the mortgage. At maturity the borrower planned to either sell or roll to another mortgage. Now neither possibility seems realistic. The result is likely to be billions of dollars of foreclosures, but who will buy near empty buildings? From this standpoint, commercial offices now resemble shopping malls as more buyers went online to shop.

I expect a stock market resolution this month. The EV government mandate is weakening as the reality of mine pollution and reliable batteries and their high cost are more apparent.

For now, expect sideways pricing in stocks and crude oil.