MAY 15, 2024 – It has only been ten days since I posted an update about stocks and bonds. But, when things change, you need to note it. It looks like the recent correction ended in my target range and the final leg of this Bull Market is underway. We are dealing with TARGET 1 from my January 8th post which stated the following:
TARGET 1 – The current rally peaks out around 40,522. This is followed by a decline to the 37,008-38,350 range. Then a final rally to the 42,872-45,640 range with possible targets within the range being 44,214 and 44,298.
Obviously, it would be best to round the numbers and use general ranges. Based on the above, I would say the current rally should take us above 40,000 and up to 42,000 at the high end. A small decline should end in the 37,000 to 39,000 range. And the last big move in this Bull Market should end between 43,000 and 47,000.
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In late March, the DOW peaked at about 40,300. Since then, a data correction has been made and the top is listed at just under 40,000. I haven’t seen that happen before. Regardless, the top was close enough to the Target 1 projection of 40,522. The subsequent correction was a short 5 weeks (ended April 17th) and bottomed in the 37,000 to 38,500 range at precisely 37,612.
As noted in the January 8th forecast above, the final target range is in the 43,000 to 45,500 range. It is crazy to be precise (albeit the past 5 months have been spot on), but I really am liking 44,000 to 44,300 for a final top. As this final leg plays out, a more precise target can be made.
Remember, a Bull Market climbs a wall of worries. And for 18+ months it has fed on the world predicting a recession. Regardless of where we go from here, ALL of those economists and pundits have been 100% wrong. The case is closed on them.
INTEREST RATES – As noted ten days ago, it appears the bond decline ended on April 25th. Bonds have rallied strongly since then. Albeit, the first wave of the 5-wave move has probably ended and a small decline should start immediately. A much larger rally lies ahead – which means interest rates will resume their decline at that time.
I will post updates as the stock and bond rallies unfold.
Shalom,
The Mann
P.S. If I told you that sometime in the 2030’s we may have +100% annual GDP growth, what would you say?
Tag Archives: bonds
STOCK MARKET AND INTEREST RATES
MAY 5, 2024 – It’s been awhile since I posted about stocks and bonds. It takes time for the waves to play out. Back on January 8th I posted the following:
There are two target options so I will simply label them 1 and 2. They are both bullish so I am not saying the market may go up, but it may go down:) Just saying that there are a few ways it can play out statistically. So here goes the impossible….
TARGET 1 – The current rally peaks out around 40,522. This is followed by a decline to the 37,008-38,350 range. Then a final rally to the 42,872-45,640 range with possible targets within the range being 44,214 and 44,298.
TARGET 2 – The current rally peaks out around 41,906. This is followed by a decline to the 38,392-39,734 range. Then a final rally to the 44,256-47,819 range with possible targets within the range being 44,256 and 45,598.
Obviously, it would be best to round the numbers and use general ranges. Based on the above, I would say the current rally should take us above 40,000 and up to 42,000 at the high end. A small decline should end in the 37,000 to 39,000 range. And the last big move in this Bull Market should end between 43,000 and 47,000.
===================================
In late March, the DOW peaked at about 40,300. Since then, a data correction has been made and the top is listed at just under 40,000. I haven’t seen that happen before. Regardless, the top was close enough to the Target 1 projection of 40,522. The subsequent correction has been underway for 5 weeks and we are right in the 37,000 to 38,500 range.
As I have noted in the past, as the waves unfold I can update the targets. I would say the low end of the range needs to be lowered to 36,000. I do not think the low for this correction is in place, yet.
INTEREST RATES – There is a good chance the bond decline finally ended on April 25th. This was a 4-month decline. From here bonds should rally at least through the Summer and interest rates should decline at least 100bp.
I will post a stock update when I believe this correction has ended.
Shalom,
The Mann
There are two target options so I will simply label them 1 and 2. They are both bullish so I am not saying the market may go up, but it may go down:) Just saying that there are a few ways it can play out statistically. So here goes the impossible….
TARGET 1 – The current rally peaks out around 40,522. This is followed by a decline to the 37,008-38,350 range. Then a final rally to the 42,872-45,640 range with possible targets within the range being 44,214 and 44,298.
TARGET 2 – The current rally peaks out around 41,906. This is followed by a decline to the 38,392-39,734 range. Then a final rally to the 44,256-47,819 range with possible targets within the range being 44,256 and 45,598.
Obviously, it would be best to round the numbers and use general ranges. Based on the above, I would say the current rally should take us above 40,000 and up to 42,000 at the high end. A small decline should end in the 37,000 to 39,000 range. And the last big move in this Bull Market should end between 43,000 and 47,000.
===================================
In late March, the DOW peaked at about 40,300. Since then, a data correction has been made and the top is listed at just under 40,000. I haven’t seen that happen before. Regardless, the top was close enough to the Target 1 projection of 40,522. The subsequent correction has been underway for 5 weeks and we are right in the 37,000 to 38,500 range.
As I have noted in the past, as the waves unfold I can update the targets. I would say the low end of the range needs to be lowered to 36,000. I do not think the low for this correction is in place, yet.
INTEREST RATES – There is a good chance the bond decline finally ended on April 25th. This was a 4-month decline. From here bonds should rally at least through the Summer and interest rates should decline at least 100bp.
I will post a stock update when I believe this correction has ended.
Shalom,
The Mann
BEAR MARKET ACTUALLY AVERTED…BARELY
NOVEMBER 25, 2023 – The markets instantly reversed a month ago. Just like they did last October when the Bear Market bottomed.
STOCK MARKET – Although the S&P 500 and NASDAQ went into a Bear Market, the Dow 30 avoided such. Since the October bottom, the Dow is up 9.5% and over 3,000 points. The NASDAQ is up over 15% and the S&P 500 over 11%. NASDAQ is at a new Bull Market high. The Dow and S&P 500 are within 1% of new Bull Market highs.
REGIONAL BANKS – The regional bank index ETF (KRE) is up 18% in the past month. But, still 11% below its Summer peak.
HOUSING – The housing ETF (XHB) is up 19% over the past month and within 3% of its Bull Market high.
Market action since August suggests we will have some economic trouble in the first quarter of 2024 followed by a continuation of the economic expansion that started in the Summer of 2022. 4th Quarter GDP is forecast to be just under +2%.
INTEREST RATES – Bonds also appeared to have bottomed on October 23rd. A strong rally appears ready to have a minor correction. Interest rates should continue to decline for the next 3 to 6 months. The decline will be significant.
Shalom,
The Mann
(MIS)LEADING ECONOMIC INDICATOR & MORE
SEPTEMBER 25, 2023 – Most importantly, only 3 months to Christmas:) And I am sure you have seen all of the Christmas stuff in the stores already. Next year it will be out in July. Ridiculous.
Two more recession indicators are wrong this time around. The (Mis)Leading Economic Indicator has declined for 17 straight months. I assume its purpose is to forecast a recession to occur within a few months after several negative readings. It has been wrong for over a year. Maybe this is where the broken record (look it up youngsters) recession mongers get their reasoning for thinking a recession is about to occur. Just fyi, the only other times it had this long of a streak was 1973-1975 and 2007-2009. The two worst recessions since The Great Depression.
The third indicator that has been wrong is M-2 Money Supply. It is more negative than it was in The Great Depression! Yet, no recession. In fact, it is looking like 3rd Quarter GDP may show an acceleration in growth to over 2%. However, I will say that is not a lock as I have seen forecasts from 0.5% to over 5.5% (Fed Atlanta). This quarter will be very unpredictable. But, it should definitely be positive and thus we can officially close the case on there being no recession in 2023.
Let me bring something up for the first time. I think I will be harping on this for the next few years. I believe the reason many prominent indicators are wrong this go around is due to what has happened since the pandemic. Almost all indicators soared to extreme high readings never seen before. And many are falling to record lows. What I am seeing is if you draw a straight line from say 2010 or 2015 through 2023, these indicators are exactly where they should be. i.e. The lows are evening out the highs and overall we are reverting to the mean.
I saw this recently in national retail sales. Adjusted for inflation, retail sales have been flat for the past 18-24 months. However, they increased significantly after the pandemic. If you apply the 2010-2019 compound annual growth rate to 2019 sales, you will be exactly where we are at in 2023. I will discuss more examples and provide more specific information as I encounter graphs showing this occurrence.
FED FUND RATES – The Fed did what it was told to do and held rates the same in September. Also, they went ahead and said what the market has forecast for a long time and that is another rate hike lies ahead. The 100% trend of the Fed following the market continues.
HOUSING – As I noted in a prior blog, the market is signaling weakness in the housing market after forecasting the strength we have seen all year. The homebuilder stock index has declined 10% from its July top. We need to continue to watch this play out. It is telling us we should see weakness next Spring. What will slow the accelerating strength in the housing market? Maybe 8%+ rates on 30-year mortgages? About the only thing I can think of. But, it doesn’t matter. The market just says it will happen. The price trend in the 4th Quarter will tell us if the Spring slowdown is just that or the start of a more significant downturn like we had in the second half of 2022.
REGIONAL BANKS – These stocks have declined a significant 15% from their July highs. Basically, they declined some more after the SVP failure, then soared over 40%, and now down 15% – in the end, they have gone nowhere since the Monday after the SVP failure. What is the market telling us? It definitely says not to expect the 250-400+ bank failures that so many people are predicting. Those people expected such to occur by now, in fact. As far as I know, the number remains at one small bank in Kansas. In regard to CRE loans, banks have been refinancing these all year long at higher interest rates. I haven’t heard of any significant issues. The problems have occurred in the CMBS market – gotta hand it to the supposed smartest lenders and investors in real estate:)
INTEREST RATES – Treasury Bonds have broken below last October’s low. This means interest rates are at new highs for this downturn. As I write this, I see a headline saying they are at the highest level since 2007. However, we are now on the clock to look for a final bottom in this multi-year downturn in prices (increases in yields). That doesn’t mean it will occur next week. I am thinking it is several months away. Maybe around the beginning of the year. Too early to give a reasonable forecast re timing and price (yield). The 4th Quarter price action will get us much closer to predicting when the bottom is in. What should follow will be a strong bond rally back to the range of the Summer 2022 and April 2023 highs (lows in yields). First things first. Let’s have the current downturn play out and get a bottom in place. Bottomline, mortgage rates will not be going down the remainder of the year. And they might head over 8% on the 30-year mortgage.
Well, that was a lot to cover. I will probably post again once we get the October inflation reading.
Til then, Happy Fall.
Shalom,
The Mann