ELAM: It’s 1968 all over again

Crude oil WTIC peaked a year ago in June around $120-130. It spent twelve months falling to its 200 week Moving Average (MA) then in the high sixties. A counter trend rally ensued taking the price to $90. This column has stated since that the $80 level was important, it fell this week. In fact, Thursday it had fallen $4.77 or 5.92% to $75.74 since the previous Friday. The next obvious test will again be the 200 week MA at $69.93. If it holds the long uptrend from the COVID low of $10 will be intact. This will be important as there is a multi-year head and shoulders pattern also suggesting an important test.

Stock prices fell from July 27 into late October. The rally since then is countertrend and will end this year. That sets up a larger down move extending into next year.

Social mood dictates social events. We have a historic mood shift unfolding now. In 1968 LBJ lost New Hampshire to Eugene McCarthy. LBJ withdrew from his campaign thrusting Hubert Humphrey, his VP, into the role. Johnson required Humphrey to embrace the Vietnam War to gain his endorsement. But the war was unpopular. This motivated a group later known as the Chicago Seven to arrive in the city where the Democrat Convention was underway. Their protests decimated the convention image on live television. They did not achieve a denunciation of the war but did wound the Humphrey campaign. Richard Nixon had lost both a Presidential bid against Kennedy and then a bid for Governor of California. He rose Phoenix-like to defy conventional wisdom that he was finished politically, helped in part by the Chicago chaos.

It is now a Fibonacci 55 years later. The Fibonacci number series often defines important junctures in financial markets. Again, we have a former VP running for President though he is the incumbent. We already have vigorous protests against a war in Gaza only a month old. Now as then the war has splintered the Democrat party. Now as then the convention will be in Chicago. We have a former President (think Johnson) who lost and is running again. The incumbent is as LBJ was, quite unpopular in all polls.

The result was chaos in the streets, protests, the Tet Offensive in Vietnam, and inflation underway as the stock market had topped in 1968, another parallel as this market also topped two years ago.

We report this not to take a side but to warn of an impending juncture of time and social mood. 1968 was a negative mood event. 2024 looks at least as bad, get ready.