Thursday, June 11, 2015

stock market update

The top three charts above this post are daily charts of my three main trend indicators for the US stock market. As you can see earlier this week all three had dropped below their 50 day moving averages (green lines) but held above rising 200 day moving averages (red lines). This is a classic configuration associated with buying opportunities in a bull market. I think we have just see the low of the drop from the May top and I expect the averages to soon be at new bull market highs. The bottom chart shows that the 10 day moving average of the daily number of advancing issues on the New York Stock Exchange has dropped to levels associated with big buying opportunities over the past year. This is more evidence for an imminent rally in the US stock market.

For you George Lindsay fans I might remark that the latest drop in the Dow looks like a continuation of the "five reversals"  portion the domed house in Lindsay's 3 peaks and a domes house which I last commented upon here.  So this week's low is probably point 20 and the Dow is likely to make higher highs at points 21 and 23 before the bull market ends. 

I think world stock markets are being driven higher by active QE policies by the European Central Bank and the Bank of Japan. Moreover, the Bank Of China has gradually been adopting an easier monetary policy the effects of which are manifest in the big advance in the Chinese stock market this year. Until these policies are halted I think world markets will be moving generally higher. Of course there will be the occasional scary drop of 10-20% but I doubt we will see anything like a prolonged bear market lasting a year or more and dropping prices 25-30% until monetary polices change dramatically.

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