The market’s risen to the very place I would be looking to see what’s going to happen next. It’s at an inflection point. Everybody can see it’s clearing the previous short-term high, and running right into its own down-trending 50-day moving average here. Historically, it’s a place where some battling should begin. The nature of that battle will tell a lot about real market health. It actually hasn’t shown much to this point, and would seem to need to call in some reinforcements.
Here’s what I’m looking at. The average EPS for all 500 issues in the index is still dropping like a rock. It’s now down 7.6% already since the beginning of the year… it MUST stop and turn sometime in the near future, or else… well, you know. Second, I look at today’s volume, and it has been declining nearly every day, with today being the lowest volume day since price started back up on the 12th! And, oil, while oil is just tearing up the charts (kidding), it is all of $31.43 as I write, but that is still nowhere near enough to stave off what I understand is beginning to happen… and, I think I got that right.
A dear friend sent me the write-up of a long-time market timer he’s subscribed to for years who is saying the bottom is in, and that we should be expecting a 20 – 30% advance over the next 6 to 12 months, resulting in new all-time highs! To all of which I would like to give a hearty Amen! But, I’m just not feeling it yet. We have just eked out a nominal new 2-year low, depending on what index you’re looking at, and the previous lows had some very high, climax, sell-off bottoms put in place.
But, the most obvious point, to this date, is that the market has been establishing lower lows, and lower highs… only today breaks that pattern nominally, by exceeding its previous February 1 high, which I might also add, had better volume on that day, than today! This has been the most persnickety market I think I have seen in years… I am hearing of opinions from all over the ball park; every one of us wanting to get it right. You know what they say about opinions… and, you know what I’ve said about predicting. It’s awfully hard to do… especially the future!
I’m not trying to tell you what it’s going to do. I’m trying to tell you what it IS doing, and, to date, it is NOT doing what it needs to do yet, to prove that the Bull still has enough life left in it to take another run. Until it does show that kind of life, it’s sucking people in right now, who just might wish they hadn’t. And, like I wrote my friend… If I should be proven wrong, I’ll openly admit it right here, and ask your forgiveness. I’m a big boy, and I can take my licks. I totally realize it can go up, both without my permission, and without earnings estimates rising, because it’s not always rational; and for that matter… neither am I!!!
Let me take the other side… the pattern is a perfect W-shaped bottom, and the high-volume sell-off occurred with the first leg down in the W on the 15th and 20th of January. Okay. And, the last down day for the other leg was a relatively high volume down day, that being the 11th. Okay. And, just now, we are completing the W pattern, as we are right at the top of the right leg of that W… an inflection point! And, on pretty poor volume, at its own 50-day moving average line, with earnings forecasts collapsing, and oil at a measly $31.43. I’m sorry… I tried to be positive. In any case, tomorrow begins to tell the tale of what this market is made of, and whether it’s a reviving Bull, or an emerging Bear… it’s right at an inflection point where it might begin to make that clear.
No sooner did I finish this, but I see a news headline that reads: “Recession already reality in spots from West Virginia to Wyoming.” Hello!?!?!?! Is anybody listening?!?!?
Here’s to your successful investing!
Harold F Crowell