At this stage I believe we will begin to see signs in the first quarter of the new year. My concern is that if this analysis is correct, it could possibly lead to much more serious developments as the year wears on, such as a debt crisis. It also looks as though the top came in at the end of December and not January as I had been looking for some months. However, we still might see another effort to push prices higher to build a more recognizable top.
I sincerely hope that my outlook is wrong because if it isn’t, it won’t be pretty.
My phrase for 2023 was “muddle-through”. It ended up not being too bad. Interest rates are back to where they started the year and the stock markets have made this late run back up to the highs.
When it came to updating my charts at the end of last week, the daily chart of our XJO was first up. Just look how the index was moving higher but the XVI (scale inverted) had already reversed. Perhaps initially all we need is a bit of a correction to allow some of my indicators to come off a bit, and then find the strength to have another go at the tops.
When we turn to the weekly chart of the XJO – see the red line that has proved such strong resistance for the past couple of years. That trend channel I have drawn goes back to the low in 2009. Could markets have a final burst to take the index up to the top of the channel again? It would be nice but at this stage I can’t depend on it.
When we move to the USA the picture is very similar. Today I am including the NYA which covers all stocks listed on the New York Stock Exchange including ADR’s and REITS. What a trend channel it has built since the low a couple of months ago. But of particular interest here is the line in blue. That is a running total I tally every day of the net advancing volume and declining volume. Have you ever seen such a trendline. Not only that, but this level has been where the market has topped out on more than one occasion. What I really like about these figures is that they have, over a period, formed lovely trendlines and patterns. Just look at that nice little base pattern it formed. A break of this uptrend would mean at least a correction, possibly more.
And again the index that always seems to be my worry in the US - Trannies. Right on their uptrend and haven’t kept pace with the rest of the market. A break of this uptrend would have to be considered serious
The US dollar has been quite weak for some time now. As I have shown previously, there is a direct link between the US dollar and the US indices. A strengthening of the dollar will make life a lot harder for stocks. To highlight just how some of the crosses have performed, just look at this chart of the Swissy. What a lovely big trend channel and doesn’t that look toppy.
Because of all the holidays, I have not been able to put all the signals from commodities together. Will over coming days. But what I am trying to think through is if stocks enter a downward phase, would commodities be able to withstand the pressure. It has happened before – stocks down and commodities up – but mostly weakness in stocks does carry over into commodities. More on this next week when hopefully the picture might be a bit clearer.
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