STOCKS
The Volatility Index VIX is just that, a measure of stock market volatility. It bottomed in mid-August along with stock prices. It topped in early October as major indexes made new lows. It has fallen since and registered a large -9.81% decrease yesterday on the 1,000+ INDU gain. It peaked around 34 and is headed back to the August low of 20. That will probably time the next top in stock prices.
The NASD has been the weakest of the major indexes. It new high low indicator has recovered from the lows of May, June and September to about even. Which is to say new highs match the number of new lows. One can also observe this in the daily listing of new highs and lows for the NYSE in the Wall Street Journal.
Bear markets sport tremendous rallies. This one is probably good for another week or two with a top target of 34,750 in the INDU.
BONDS
We have stated several times that the closed end municipal bond funds were approaching a trade able low. That was confirmed this week. The thirty-year Treasury Bond jumped 3.74% or 4.47 points. This rallied all the municipal bond funds. BLE for example jumped to $9.88 but still trades well below its January high near $15.
Stocks were said to rally on the great news that inflation was only 7%. The patterns argue otherwise and stocks jumped with bond prices. It is reasonable to expect an extended bond rally after the worst year for bonds in decades.
THE DOLLAR
The U.S. Dollar topped in mid-September. It fell -2.14% Thursday, also adding fuel to the stock rally. Given up for dead, the British Pound rallied 3% but too late for the belated Liz Truss. The Euro also rallied 1.97%. Better grab that inexpensive European vacation while you can it is about to be more expensive. And another segment is as well-crude oil.
ENERGY
This column has noted crude oil has traded sideways in the high 80s for some time. That also changed Thursday. Friday morning December West Texas Intermediate is up $2.70 to $89.18. World oil trades in US Dollars. A weaker dollar means higher crude prices for maintaining its constant value. Expect the entire complex, crude, gasoline, natural gas, and heating oil to resume year earlier rallies. The Saudis are correct, the U.S. should concentrate on producing its own energy.
POLITICS
Team Biden acknowledged 75% of America thinks we are headed in the wrong direction. Yet he proclaims he will stay the course, presumably of unpopularity. The Democrat support of MGA Republicans resulted in a weak field of losers, just the life-line Biden needed. A resumption of higher energy prices may take the wind from those sails.
