As we go into the second quarter of 2018, the biggest question, from where I sit, is ….. is the bull market on Wall Street over?
I was really worried when I wrote my notes at the end of last week – in fact I said at the time that it was “nerve wracking updating my charts” and that I “just had the feeling that things are hanging in there by a thread and it is a pretty thin one at that”. Unfortunately, that thin thread broke last night.
What was particularly worrying me at the end of last week was whether the triangle type pattern that the SPX had formed in the hourly chart over the previous week or so was a fourth wave with a fifth wave down to come. This looks to be the situation we are faced with now. So having broken down in a definite panic type action, was that the end of the fifth wave from the recent high?
What makes analysis particularly difficult at the moment is that the indices such as the Russel 2000 (RUT) and the NYSE Composite (NYA) which are actually nicely broad based indices, actually look better than indices such as SPX and the Dow.
But a couple of good news pieces – gold was a definite beneficiary of the latest sell-off. Back up under the overhead resistance that has stopped all moves higher for the past five years. But I was interested to see that silver was actually a smidgen better than gold. As I have been repeating ad nauseam, I need silver to start to be involved in any buying in gold otherwise all price rises fail.
The other little point of interest – I haven’t mentioned my Geniuses for a while. For a start the people that prepare these figures came out and admitted that there had been an error in their calculations – right at the top of the market of course – but since then the amount of money on the sidelines hadn’t changed appreciably. However, last week it did and at the moment they have less than 50% of their funds invested. I admit that over the years I have seen them have all their money on the sidelines and actually leveraged short right at the bottom of a bear market. So they could continue to be sellers into any weakness but at least now they are getting to a level of cash reserves that start to impress me.
And one other piece of interest – iron ore prices actually rallied off the lower limits of the triangle that prices have been locked in for the past few months. It desperately needed to achieve this small milestone. Not out of trouble but at least we have a chance of a recovery now. And don’t we just need some good news.
Obviously our market will get belted around the ears again today. But we have been doing a pretty reasonable job of limiting the losses recently when Wall Street has an attack of the nerves. Banks still awful. Avoid them like the plague but many of the stocks in the mid section of the market have been doing a pretty good job of “trying” to hold in there. However, will be a bit harder again today in the bottom end of the market. But fortunately, the better gold price should give us something to build on.
So at the end of all that, I haven’t actually answered my own question of whether the bull market on Wall Street is over. A bit early to be sure but I don’t think we are far off from some surprises with a rally into late April then a re-think.
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