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Price action over the prior week
The stock market consolidated over the 2410SPX support I have noted as important to my analysis in seeing new all-time highs.
Anecdotal and other sentiment indications
The wolf also shall dwell with the lamb, and the leopard shall lie down with the kid; and the calf and the young lion and the fatling together; and a little child shall lead them.
This is a prophecy from the Bible, which is supposed to be a prelude to the ushering in of the Messianic Age. Basically, it suggests that various creatures will change their nature as a sign of the coming of the Messiah. But, maybe something even precedes this.
For years, I have been told that money finds its way into the bond market when the stock market declines. Supposedly, the bond market is where investors seek safety as the stock market declines. Effectively, many people believe the nature of the stock market and bond market are similar to that of the wolf and the lamb. Yet, since mid-March, the stock market has been rallying along with the bond market. Have they learned to “dwell together?”
Now, clearly, the stock market is not “supposed” to be rallying alongside the bond market. Right? So, either the Messiah is coming, or supposed correlations are breaking down. Well, since I don’t see other signs that the Messiah may be coming imminently, I have to assume that this relationship may be breaking down. And, I discussed this potential last week.
But, one even has to question the prevailing market assumptions regarding the relationship between bonds and the stock market. If we look at the long-term charts, do we not see the stock market and the bond market in a multi-decade rally? Are they not both much higher than they were several decades ago? It would seem so.
When I was a youngster my third grade teacher had a sign up in the front of the room, which I look back upon and recognize the wisdom in those words:
“Please put brain in gear before engaging mouth”
Sadly, as adults, we fail to take heed to such wise words. Rather, we allow others to do our thinking for us, and we simply adopt that which “sounds” right rather than actually testing it against the facts. The fact is that we should not use the bond market to make our decisions regarding the equity market.
And, as I said last week:
I have noted this many times before. If you are trying to trade based upon some seeming correlation then you are doing more analysis steps than necessary. First, you have to perform analysis to get the direction of the correlative asset correct. Second, you have to “hope” that the correlative asset maintains the same seeming correlative relationship with the underlying asset. Hence, you require a two-phase step, one of which is based upon “hope,” in order to make money. Would it not be much simpler and easier to analyze the chart before you and see what it is saying rather than performing the dubious two-phase process just noted? You certainly take the “hope” out of the equation that way. . .
Anyone that has followed any form of inter-market analysis over the last few years understands the huge flaws in such methods. They have seriously underperformed the market due to their multi-layered linear perspectives that were unable to identify the shifting correlative paradigms in the market. And, sadly, many have still not recognized it.
Price pattern sentiment indications and upcoming expectations
Not much has changed in my expectations. As long as the SPX maintains support over the 2410SPX region, my next upside target is 2473SPX.
But, please remember that the higher we go, the higher the risk of an intermediate term top. In fact, I still believe we will see the 2300SPX region one more time in 2017, but my preference remains to see the 2500SPX region before we see the 2300SPX region again. Should we see a break of 2410SPX, with follow through below 2400SPX before we see the 2500SPX region, then I may have to assume that we have begun the next consolidation phase, which can take us down towards the 2300SPX earlier than I had originally expected.
It seems that Seeking Alpha has changed the way they tag articles. So, while my articles used to be sent out as an email to those that follow the metals complex, they are now only being sent out to those that have chosen to “follow” me. So, if you would like notification as to when my articles are published, please hit the button at the top to “follow” me. Thank you.
Lastly, I will be on vacation for the next few weeks, so I may not be as engaged on Seeking Alpha, as any extra time I have will likely be devoted to my trading room. Also, I will be visiting Israel in the coming weeks and am considering having a get together in Jerusalem and was wondering if anyone will be there who would be interested in joining me for a get together on July 4th?
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.