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Posts Tagged ‘market retracement’

The Topping Process Continues

August 8th, 2019 by Kurt L. Smith

The Dow Jones Industrial Average sold off almost 2,000 points in just a few days recently. The Dow now trades at the same level as it did back in January 2018.

Bonds meanwhile continue their move higher in price (lower in yield) as unlike stocks, their corrective move had added momentum. When it comes to bonds, we hear statements like highest prices (or lowest yields) since 2016. That’s because the current bond market rally is a correction of the downward price trend in bonds that dates back to 2016 (for me 2012).

Last month’s letter discussed how I expected asset prices of bonds, stocks and gold to soon complete. We have seen the initial move down for stocks and I look for similar strong downward moves to begin in bonds and gold at any time.

“At any time” is the operative word. Last month’s market focus was based on the movements of the asset markets over the past weeks as well as the past several years. Markets behave like markets, despite the actions of central bankers or presidents, war or peace. So last month’s giddy didn’t indicate a continuation of trend, but rather the end of a move.

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Correction Highs (And Lows)

July 11th, 2019 by Kurt L. Smith

For the past several months we’ve seen giddy up; now we are left only with giddy. Be it Stocks, Bonds, or even Gold, asset prices have generally had a nice 2019 bounce. To a large extent asset prices have peaked together. Unfortunately the rallies appear to be over, meaning lower prices from here.

How can that be? The news is great, prices are rallying and even the Federal Reserve appears poised to lower interest rates as yields have shriveled as US Treasury note and bond prices have jumped. The trend should be our friend and the trend is up, across the board for assets, right?

Wrong! The trend is not up. Despite nice gains for this year, assets are in the midst of finishing upward corrections. Gold, which peaked in September 2011 at $1921, bottomed in December 2015 at $1047 where it began a rally that may have recently ended at $1440 last month (all asset prices and dates per Bloomberg). While an additional advance may unfold, the next major move in my opinion is lower, to new lows rather than new highs.

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Bonds Are Markets Too

June 12th, 2019 by Kurt L. Smith

The bond market has been on quite a tear of late. With lower yields and higher prices, bond market articles have been on the front pages of The New York Times as well as other prominent articles in their business section.

Stocks on the other hand ended last month with their sixth consecutive down week. With bonds moving higher in price and stocks moving lower maybe there is something new going on. Perhaps your stock portfolio hasn’t been performing as it once did. Is something new happening?

From our vantage point, there is nothing new going on in the markets. The bond bear market began in 2012. Others may argue with me on this but that gives us a sense of how long a topping (or turning) pattern may take to develop or be fully recognized.

The bond (price) topping pattern or yield bottoming pattern has unfolded over many years already. Perhaps we will see something similar time-wise with stocks, but perhaps not. Perhaps the reason your stock portfolio isn’t performing the way you think it should is because we are in a similar topping pattern currently with stocks. If this is the case, which I believe, the key issue we need to address is one of risk versus reward.

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NEWS FEED

The $247 trillion global debt bomb washingtonpost.com/opinions/the-2…