According to the Weinstein stage analysis, we didn't make it into stage 4 with the market correction. We might be entering into Stage 3.
For a recap:
Stage Analysis:
- Stage 1 - Basing Phase
- 30 week moving average loses its downward slope and starts to improve
- Stage 2 - Advancing Phase
- 30 week moving average slopes up.
- Close is above the 30 week moving average, with higher lows
- Fundamentals improve
- Stage 3 - The Top Phase
- Loses momentum
- Choppy market
- 30 week moving average loses upward slope and flattens
- Stage 4 - Declining Phase
- Close line below Moving average
- 30 week moving average is sloping down
McClellon has a good article this week. Stock Market in a Rogue Wave.
Let's see how it goes this week.
The markets are in a bit of a correction. My indicators are not fully in the red at this point, so it is a minor correction for now.
Trump announced tariffs last week and we are on schedule for rate hikes this year.
If the major indexes break through their 30 week moving averages, then I will call a full blown correction. We'll see what this week brings us.
While the 10% pull back was not as large as the 20% pullback in 1987, it was still exciting for a market that just doesn't want to stay down for the count. Jesse Felder has a blog post referring to an interesting read last October by Robert Shiller outlining how a drop in the market can still happen along with the psychology behind it. See the New York Times article.
The CNN Fear & Greed Index is logging Extreme Fear. A reading we haven't seen in months.
And finally, one of my favorite blogs, Decision Point, has an in-depth review of the market titled, Bear Market Rally Over?
At this point the Stan Weinstein indicators are all back in the green (minus the dividend to Dow). The major indexes came close to their weekly moving averages but didn't actually touch them.
I don't know about you, but I've been waiting for some sort of pull back for months. The market has been too steady on it's upward climb. This week we had the strongest pull back in months! All the major indexes came close to touching their 30 week moving average line last week. See the chart below.
Are we in a bear market? Too soon to tell (and not yet signaled in my indicators), but here are some interesting articles:
Last week saw the first pull back in months. A much needed pull back if you ask me. The moving averages are still above their 30 week line, but we did see a decline. The NYSE and Dow were both down for the week. See this CNN post for speculation on why markets are down for the week.
Bitcoin is also falling, rather sharply. Tim Ferriss has a really good cryptocurrency show if you want a little background. The interview with Nick Szabo is pretty interesting.
Tax cuts were approved, the government shutdown abated for a month, and we continue to see Extreme Greed on the CNN stock market scale. All of my indicators are in the green. Bitcoin continues to have it's ups and downs, and frankly feels a bit more normal than our stock market.
Indicators remain positive, bitcoin gets volatile and the federal government is in shutdown mode. Futures for the day are down but the CNN Fear and Greed calculator is screaming Extreme Greed. We'll see how this plays out.
