All three DOW averages have now topped. The Transports came first topping May 10. Transports are now trading under the 200-day Moving Average of 14,284.
We have mentioned the divergence between Transports topping and Industrials making a final high August 16. Trading down over 400 points this Thursday morning, the 200-day MA at 33,360 is not far away.
Utilities are not part of Dow Theory but topped Sept. 2 and then quickly took out its 200-day MA at 887.
The NASD, NDX 100, and Facebook all topped the firs week of September along with the Utilities.
Meanwhile, yields on the widely watched Ten Year Treasury vaulted from the low of 1.15 in August to 1.55% today. Percent wise, that is a big jump. Jerome Powell’s transitory inflation is not noticing the transit part. Cable business shows feature a parade of CEOs grappling with increased casts (Pizza Hut, Fed-Ex, shale producers) and unable to find employees.
Be aware that we have multiple cycles converging including a 233 year from 1788, and a 20 year from 2001, and a forty year from 1981-82 when the DJIA finally bottomed. My e-mail box is full of predictions of year end S & P 5,000 targets. I don’t think so. Lows in late October and November are likely for stock indexes. This would be followed by a lower high in Spring 2022 than what was recorded in 2021. You heard it here first.
West Texas Intermediate is trading at $75 and Brent hit $80. We titled a recent column Not So Fast. In it we noted Europe is short of wind and solar and had closed many coal-fired plants. Vladimir must be pleased that Biden has agreed to the Russian pipeline to the EU while doing all he can to shut down US producers and pipelines. Natural gas futures have spiked to $5.50. In 2019, 81% of the energy supply came from fossil fuels according to the International Energy Agency. Solar and wind only supply electricity. But planes, trains, and ships rely on fossil fuels. IEA estimates fossil fuel will still provide 73% of energy by 2040. And as we noted last week, Zoom and Webex has saved a lot more gasoline this year than electric cars.
Nothing looks good on the social mood front. Democrats scramble to pass their trillion dollar entitlements. Demand has never been higher for tax accountants, and no wonder given the mountain of rates that will be hiked if all this comes to pass. Democrats argue among themselves but had no problem coming together for 60 Senate votes on Obama Care.
Biden’s approval rating among Independents is a mere 37% and falling. A record high stock market with falling faith in the President ushered in the bear market of 1973-74, dropping the DJIA 50%.
