Market Analysis

Dollar Breakout Threatens Rally

The story of 2018 has been one of U.S. growth, but not necessarily global growth. While most major economies around the world are still expanding, they have been decelerating or holding steady, whereas the U.S. economy has been picking up steam.

As is typically the case, a stronger relative outlook for the U.S. has led investors to bid up the dollar, which is causing a reshuffling of the cards. Currencies always have a way of sharing and redistributing growth around the globe, and this time is no different.


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Posted in: Bonds Dollar Economy Federal Reserve Inflation Recessions

Interesting Stats and Their Implications

Over the years, stock market enthusiasts have come up with at least a billion or so novel ways to forecast future performance. Some of the more well known indicators include the January Barometer, the Super Bowl indicator, and the old adage, "Sell in May and go away."

Most of these indicators lack statistical significance, implying that they're more or less coincidence, but it can still be fun to explore what they have to say. This is especially true when you're in the midst of a boring economic expansion where nearly every data set is pointing towards higher prices.


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Posted in: Corrections Federal Reserve Inflation Interest Rates Volatility

Who’s Winning the Trade War?

If we are, in fact, in a trade war - then who's winning? Is it the U.S.? China? Perhaps the smaller countries that don't appear in the headlines each day?

From my perspective, there are two ways to answer this question. The first is by looking at what's happening with stock prices around the world; the second is by looking at actual economic fundamentals. Let's begin with stock prices.

One of the key tenets of Dow Theory is that the stock market discounts everything. As investors make their buy/sell decisions, they are factoring in every piece of information known and available to them. When billions of investors around the world do this collectively, it's fair to say that an awful lot of information is being priced in.


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Posted in: Dow Theory Earnings Economy

Stop Looking at the Industrials

Trade wars be damned. The U.S. economy is strong, and if your focus remains on a possible dismantling of global trade, you're missing the bigger picture.

One of the reasons the average investor may have a distorted view of what's going on in our economy is because the stock index most closely watched by the average Joe is the Dow Jones Industrial Average. Anytime you turn on evening news - or even CNBC for that matter - this average gets the most publicity.


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Posted in: Corrections Earnings Economy Federal Reserve Momentum

Correction Update

Back in early February, in the midst of the most vicious selloff we've seen in years, I showed the chart below and made the case that we were seeing a "minor blow-off top in the context of a continuing primary bull market." Today I'd like to update you on that view.

My February comments were based on two main factors: we had just experienced a two-month long explosive momentum-based rally, and the economy remained on steady footing. The combination of these factors left me with the impression that stocks would eventually work themselves higher, but it would take a while. I did not, however, expect it to take quite this long...


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Posted in: Corrections Economy Gold Momentum Primary Trend

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