I’ll start off today with the stock market. As most of you probably remember my thesis for months now has been that this parabolic move in stocks would eventually start to stagnate, roll over, and probably at some point crash. As that process plays out I’m looking for liquidity to begin leaking into the undervalued commodity markets. Basically the exact same progression that happened at the 2007 top.
I think that process began with the
high-volume reversal on May 22. As you can see in the chart below, after
that event the character of the market changed. Before that, every move
out of a daily cycle low began powerfully. The initial thrust created
momentum with follow-through.
stocks came out of their most recent daily cycle low, no momentum was
generated. Stocks immediately retraced the initial thrust. That was
followed by another powerful rally as the dip buyers again tried to push
the market higher. But as we saw on Friday it also had no
follow-through. While it’s always possible that Bernanke can throw
enough money at the market to break it out of this range, and retest or
make marginal new highs, I think the odds are better that we have
started the stagnation/rollover process that I have been expecting.
For the rest of the weekend report....
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