If you are not a subscriber to our (cheap – $40/year) insider view of things on the www.peoplenomics.com site, and you don’t understand what is happening in the market right now, consider this a Fourth of July gift.
I don’t share too much of the Peoplenomics content because there are so many people who are “free lunchers” that I don’t have any particular inclination to give away my life’s work for free.
But since our headline Thursday (Regular Scheduled Rally) may not have made sense by the end of trading Thursday, and because you may think Ure is a whack job, I’m going to share just one corner of one chart so as to enlighten you a bit.
Before I show you this chart snip, however, some necessary schooling in how real trading works in real markets.
- Stocks go up and stocks go down. However, it is not an entirely random affair.
- We present a proprietary way of looking at both the U.S. and global markets that synthesizes a number of trading techniques.
- Three major techniques, the first of which is the Elliott Wave as written up in Ralph Elliot’s books and is throughout his R.N. Elliott’s Masterworks: The Definitive Collection which you can buy on Amazon for $30-bucks, or so. A more approachable interpretation comes from Bob Prechter in Elliott Wave Principle: Key to Market Behavior.
- The second technique which we use is based on trading of trend channels. Gilbert Raff is the rock star here with his Trading the Regression Channel: Defining and Predicting Stock Price Trends. It explains how channels work and when coupled with the Elliott approach gives additional insight into expected market behavior.
- The third technique is one that I necessarily designed myself: The Aggregate Approach to market analysis. I designed this approach to address a common, every-day issue with trading markets. How many times have you seen the NASDAQ go one way and the Dow go another? Or the S&P going up while the Dow is going down? I created the Aggregate approach in order to take inter-market “trading noise” out of the equation as much as possible.
This last is key: The theory holds that at the end of any trading week, there is always a finite, definable, total amount of money in the world. And so if someone wants a sense of “What Next?” all they need to do is look closely at a synthesis of Aggregate, Elliott, and Channels to make useful inferences and projections.
Now, about that corner of a chart I promised you: This chart is current as of the pre-open on Friday and it’s my Aggregate view of the U.S. market since the first of the year (1/1/2017):
The small bump up (shown for today) is based on before the open futures prices.
As you can see we are in a longer (Elliott) view in a fifth wave which is likely to be terminal. What happened in yesterday’s trading was a smash down to the bottom of the block trend like just above the black 4 on the upper right of the chart.
To Elliott Wave purists, Aggregated market numbers are slightly problematic in the some traditional rules of Elliott (as applied to stocks) such as Wave 4 is always bigger than Wave 1, do not necessarily hold true. On the other hand, however, it’s noted in the literary that in commodity trading while the five-step (or three steps) under Elliott are there, the rule sets governing their behavior is not the same as for stocks.
Then we dial in some history in order to make some tentative guesses as to where things will go next.
In tomorrow’s Peoplenomics ChartPack section, I’ll be holding forth a short opus on where we are in the 1929 replay wherein Donald Trump seems in many ways to be replaying the historical role of Herbert Hoover.
The hint I will again repeat – which drives us toward believing a top will come this summer which will be a longer-term All-Time-High is to count the trading sessions (in days) between when Herbert Hoover took office (March 3, 1929) and when the all-time high was set September 3, 1929.
Now, looking at trading days for the market from the January 20, 2017 swearing of Donald Trump into the Office, we can begin to consider how the waveform analysis (snip of chart above) begins to foreshadow a possible future outcome.
Of course, I work out all these numbers and that’s why Peoplenomics is not free because, honestly, I’ve had people tell me it’s worth 10-times the price – and more.
I don’t mean to sound like a broken record on this stock market stuff, but I consider stock and commodity trading to be far more ethical than trading in notional currencies. Which is to politely say I believe before too many years have passed, digital currencies – like the price of Tulips in Holland circa 1634 – will have shown themselves to be less substantive that either lots of physical goods (commodities) or fractional ownership of real companies than make real goods or provide real services (stocks).
When a trend looks like it will be breaking out to the upside, I will mention it. That’s what I expected earlier this week. But it’s axiomatic in my approach to trading that when a trend channel is being “re-traced” that it tends to reverse at either the middle of the trend channel or the bottom.
There will be occasions where a short excursion out of channel may occur as well, but these are relatively rare and seldom last long.
A possible example will be this week’s trading which may approach one of our proprietary trading tool projections which could trigger going to cash or outright short the market. Based on the wave count, however, while a break down from the 4th wave is possible it is more likely that any excursion will be transitory enroute to new highs.
Not that I enjoyed seeing four figures of Ure net worth evaporate yesterday. I assure you I did not.
But that’s why I’ve put 20-years into the study of Long Wave economics, oodles of books on trends and trading, and so forth. I don’t offer trading advice – that’s between you are your Supreme Being.
What we do provide is what we hope is a fully rationalized approach to markets that offers possibly useful ideas to augment your own savings and investing style.
So for those asking “What Happened to the Rally?”
- The market simply hit the bottom of an ascending trend line. It may hit it again, too. That doesn’t bother us in the least because?
- Unlike putting money down in a casino, where the roulette or slot wheels stop where they will and that’s the end of the wager, stock and commodity trading is different in this key sense:
YOU SAY WHEN TO STOP THE WHEEL.
If you bought into the market on Monday of this week and sold out at the panic lows yesterday, you epitomize the concept “Loser!”
If, on the other hand, you bought into the market when our long-term model (which we won’t event talk about this morning because that’s another long discussion) turned bullish back on November 11, 2016 and has remained so ever since, selling at the bottom of yesterday’s trading would still have done fine.
You see, our Aggregate back in November was 17,260.67 and even at the bad patch this week, it was at 19,600-something. That’s more than 13% in a bit more than seven months.
“Winners” in the stock market are long-term strategic players who don’t get shaken by short-term events.
In July of 2001 our Aggregate was in the vicinity of 10,460. In the weeks following September 11, 2001 it dropped into the 8,200’s. Yet six months later is was again above the July 2001 levels and going higher.
But you needed to be nimble, because by July 2001, the Aggregate was actually lower than after 9/11.
Making money trading stocks is not for everyone. Most people lack patience or become egocentric thinking they, and only they, have insight into the future.
The numbers say no, everyone can see the future clearly enough, but it takes some work and it’s not going to be left under your pillow by the Tooth Fairy.
In today’s Me, Me, Me world, people want free lunch. For those people we offer Bitcoin ($2,534 this morning) and a bushel of tulip bulbs.
Real investors own land, buy best-of-class investments, and steer clear of fads, especially those offered up by “financial experts” who haven’t beaten the time-tested methods of Buffett-Munger or Templeton. Or Elliott. Or Raff.
Now, back to the usual flow of stuff:
Personal Income and Expenditures
Just out from the Bureau of Economic Analysis:
“Personal income increased $67.1 billion (0.4 percent) in May according to estimates released today by the Bureau
of Economic Analysis. Disposable personal income (DPI) increased $71.7 billion (0.5 percent) and personal
consumption expenditures (PCE) increased $7.3 billion (0.1 percent).
Real DPI increased 0.6 percent in May and Real PCE increased 0.1 percent. The PCE price index decreased 0.1 percent.
Excluding food and energy, the PCE price index increased 0.1 percent.”
The real number – the one you feel in the checkbook – is:
Personal outlays increased $9.5 billion in May (table 3). Personal saving was $791.0 billion in May and the personal
saving rate, personal saving as a percentage of disposable personal income, was 5.5 percent (table 1).
We note the definition of personal savings is “…personal income less personal outlays and personal current taxes….” which means, near as we can figure it, that buying a new motorhome might be considered savings…
CNBC sums it up this way: US consumer spending up just 0.1%, despite income gain…so is there pent-up spending out there?
Dow futures are up 36, but we are still open to the idea of another bounce off the bottom of our trend channel as explained above.
Climate Change or Hype?
From the NY Times: California Today: Heat Wave’s Triple Threat.
It’s in the Book
It’s the kind of scenario I laid out in my book Broken Web: If Amazon’s cloud goes down, the internet would be in trouble, says Reddit’s Alexis Ohanian.
Related – since within five years I expect government internet licensing – we find this: Germany approves bill to fine social media up to €50mn over online hate speech, fake news.
And in our “Leave it to CNN” File
Laughable play for eyeballs, ain’t it?
We will keep our eyes on collapsing news networks…