Our intermediate-term technical indicators remain on sell signals, supported by investor sentiment, in the U.S. anyway, remaining too optimistic for a bottom to be in, to say nothing of the dismal global conditions, risk of a recession, and so on.
Expectation of unfinished business on the downside is also supported by seasonality. Over the long-term, according to the history of our Seasonal Timing Strategy, the market’s unfavorable season tends to continue into some time in the October/November time-frame.
The headlines in the financial media this weekend are all about what a miserable third quarter it was for investors.
Thanks to our downside positioning in ‘inverse’ etf’s at our May 8 sell signal. we found it to be just the opposite.
But, although expecting further downside ahead in coming weeks, quite possibly a significant further decline if our next downside target also turns out to be accurate, we’re entering October. So the time is coming when we will be looking for our next buy signal and when most investors will probably finally see some relief.
Several months ago I suggested that stock market analysts would do well to have their indicators also running on the price of crude oil.
Oil fell to a low last summer with the stock market, rallied strongly off that low with the stock market, then reached a peak on April 29, the exact day of the stock market’s peak. It then plunged with the stock market to an extreme oversold condition beneath its short-term 50-day m.a. in August. And beginning on August 10, the exact low of the stock market, oil also began a stutter step rally off the oversold condition.
And the pattern continues.
MarketWatch. “Mutual-fund investors and exchange-traded-funds investors looking at stocks outside the U.S. are either staring at bargains of a lifetime or standing at the brink of even more losses. . . . . Dan Morris, global strategist at JP Morgan Asset Management says, “Either Europe gets its act together and comes up with a credible plan, in which case equities are a fantastic buy, or they don’t and we get a global recession. I don’t think we’ve had a crisis where it’s been so dependent on political action.”
Comment: Really? To name only the two most obvious, the outcome of the crisis in the U.S. just 3 years ago, in 2008, was not extremely dependent on political action? The repeated crises in Japan since 1989 have not all been dependent on political action?
Financial Times: “Concerns about a slowdown in China, and by extension emerging markets have been gathering in recent weeks, even if the data has been overshadowed by the eurozone debt crisis. Reports on industrial production, fixed asset investment, and retail sales have all pointed to a further deterioration in Chinese economic growth.”
Comment: Concerns have been gathering in recent weeks? From the looks of the bear markets in China and emerging markets, there were many who were further ahead of the curve than just becoming concerned in recent weeks.
The Globe and Mail (Canada). “Canada needs to strengthen ties with China. When the Conservatives took office in 2005, their foreign policy consisted of annoying China and turning toward more familiar faces, like the United States. Today the government touts a new era and holds Canada’s relationship with China as a bargaining chip with our closest friends.
If Americans don’t want TransCanada Corp to build a new pipeline through the U.S., well “there are many other countries and markets for our oil,” warned John Baird, the minister of Foreign Affairs in a speech in Calgary. And in case anyone missed the real message, he spelled it out: “China is now our second-largest trading partner as well as being one of the fastest growing investors in Canada.”
BBC Business News. “Brazil’s central bank has lowered its forecast for economic growth to less than half of last year’s, partly blaming slowing global economies. The bank pointed to the deterioration in the international outlook for the downgrade, and also to spending cuts enacted by President Dilma Rousseff, partly to remove all stimulus packages introduced since the onset of the global financial crisis in 2008.”
Brazil’s stock markets were also well ahead of the news.
To read my weekend newspaper column ‘The Economy’s Real Problems!’ click here!