There is always a mix of positive and negative actions in society, but their amount and intensity vary with the social mood.
And that’s where we are now. Consider these concurrent events.
British Prime Minister Truss resigns after 45 days.
Higher interest rates are slowing home sales, but American Airlines is seeing an increase in travel.
Short sellers are betting on lower energy stock prices, but Goldman Sachs predicts Brent will return to $115 from the current $92.
Stocks are accumulating hundreds of DJIA points after falling 20% this year.
We believe that the primary trend in the stock market is declining and will continue for some time to come. But the number of new lows to new highs reached earlier levels where computer-generated buying programs took off. This explains the hundreds of points moves over the past few days. The percentage of NYSE stocks in a bullish position hit a low of 17.5%, another position that sparked previous rallies. Finally, our most reliable indicator, the NYSE Advance Decline line, has also sold so much that it is attracting new money.
The map pattern for the DJIA is remarkably similar to 2007-2008. If this pattern continues, we should see a substantial drop after the election. No doubt the Democrats will blame this on a Republican victory. But by then, the bear market will be a year old.
On Friday, stocks needed a weekly close above 30,500 to predict a move to 32,000 for the Dow Industrials. The 200-day moving average (MA) is now at 32,745 and that could be an extended target. We last visited that MA in mid-August. This should bring us into the time of the midterm elections, say November 2-9. Then we can recalibrate the next move, which is likely to be a resumption of the downtrend.
West Texas Intermediate Crude (WTIC) last peaked at $123 in June. It has been declining ever since. A corrective rally began at the end of September. So far we’ve got a leg up close to $95, a leg down to $82, and we’re in a final third wave up now. The 200 day MA for this commodity is $97.48 which is again a good target. Gasoline futures, excluding federal taxes, are now $2.47. The 200 day MA for gasoline is $3.04.
There is still no widespread awareness that an extended bear market has begun. But an overview of street protests around the world in Belgium, France, Germany and Iran speaks to the global turmoil, adding every country in South America to the mix. Russian men flee conscription in Putin’s sputtering war in Ukraine. Xi’s China continues its crackdown on any dissident with Soviet-style monitoring of all civilians.
A negative social mood drives down global markets, not midterm elections.