The long-anticipated correction in stocks may have arrived. Pay close attention to next Monday when the S&Ps hits it’s 233-day window from the December 2018 low, warns Jeff Greenblatt.
Near Thursday’s close the Dow Jones Futures (YM) traced out a whopping 485 point move off the high. If it doesn’t get bigger, bears are going to starve this winter. The elusive pullback may have finally started. But it is slim pickings at this point. Who knows, it may work for the bears for a while.
We’ve talked about it in this space. Last week I showed you precisely how markets can get allergic to the impeachment process. So far, the public is bored as ratings are very low. The public isn’t buying this and quite frankly, neither is the stock market. What they are buying is the ongoing discussion on the trade war that has been going on all year. Markets dipped on Wednesday based on a Reuters report that “Phase One” may not even take place this year.
Are you surprised? All of this is going on while China is getting set to complete the clamp down on Hong Kong, which is now not likely to even be the financial center of Asia anymore. I’m not whistling in the dark on this issue. On Tuesday the U.S. Senate unanimously passed legislation aimed at protecting human rights in Hong Kong amid this crackdown. As it turns out, the House of Representatives approved its own version last month. All of this may be more symbolic than anything else but its shows there is a certain level of pushback as to what is going on. As far as our work is concerned, when Trump wants to juice the market a little, he puts out the possibility of good news and the markets keep buying it. I’ve never had confidence in a real deal and I still don’t.
But markets are way overdue for any type of pullback, especially before the Santa season commences after the Thanksgiving holiday, which hits a week late this year. Our time readings work very well in pinpointing the start of this fade. What else should we call it? Our chart of the week has the E-mini Dow Futures stalling in the 261-bar window on the 180-minute chart from the Oct. 3 low (see below).
The Nasdaq 100 has a similar reading. Perhaps more important is the fact the E-mini Dow is up 233 days from the bottom last year on Dec. 24. The cash markets have a different time configuration, their 233-day window comes next Monday. Why the difference? The E-mini Dow count takes into consideration partial after-market trading on holidays. The pullback could’ve started next week but at the rate we are going, perhaps it will complete by then. This is not a prediction but since corrections usually end with major headlines, you can’t rule out a massive headline concerning the Hong Kong protests next week. In case you were wondering, when it comes to the time element of technical analysis, markets are always on time.
Dollar Moving Lower
Elsewhere the U.S. Dollar had a thrust lower even as it is bouncing right now. The concern of many smart people including Peter Schiff who calls the Federal Reserve Repo purchases QE4 is the purchases (temporary but ongoing through at least January) we see from the Fed will continue to erode the value of the currency over time. I don’t think the dollar will go straight down, nothing does. This is likely to be a process over a longer period. Lots of people have been calling for the dollar to drop, including the President. I haven’t always agreed with Schiff but I must admit his timing is much better this time given my Kairos readings support all of this.
Our Kairos readings caught the exact top nearly two months ago and last week it appears to have caught a secondary high. We could very well be in the early stages of a monumental drop. With the stock market in stall mode, bonds continue to move higher and retest the recent breakdown. A quick note on bonds, one key tendency over the years is its proclivity to go sideways and waste a lot of time. It is entirely feasible the 10-year Treasury note could bounce to roughly 131-08 in a much larger sideways pattern since the high in September.
In summary, the markets look like they are finally taking a break, the bond market is pushing back as is the U.S. Dollar Index. But it appears the bond market should have more staying power than the Greenback, which could rollover any time going forward. Pay close attention to next Monday when the rest of the market hits it’s 233-day window. It will be very hard for the market to get a real selling leg this time of year.
