Market Analysis 101
As we wait for the other shoe to drop, you may want to go back and take a look at our September 7 blog, “There is no Worry”.
These are my views distilled since 1966, over 55 years.
- Forecast Market Direction vs Real Market Direction is important.
- The five major markets are: Stocks, Bonds, Dollar, Commodities, and Gold.
- Stocks and Commodities are the key beneficiaries of the FED funny money stimulus.
- Gold, 10 year interest rates and the Dollar are key Barometers and are applied to market indexes to forecast moves as they pick out subtle characteristics.
- Gold is the baseline barometer.
- 10 year interest rates and the dollar are secondary Barometers.
- Crypto is trying to replace Gold, but it has no real value, is primarily a digitized sentiment indicator of Central Bank Policy. It currently is in center focus as a failed Central Bank Crisis is building.
- The direction of the 50 day moving average for each market is probably the simplest measure for analysis.
- Forecast Market direction can be calculated by dividing a market by one of the three influencing barometers, Gold, Dollar, and 10 year interest rates and applying the 50 day moving average calculation.
- Realtime Market direction is calculated by applying the 50 day moving average to a market. Direction is the key factor, over or under the average are only talking points.
As an aside…
Moving forward in the markets I see the biggest concept evolving out of the “Climate Stability Crisis” (forget Global Warming nomenclature), is the push toward “Localism” and away from “Globalism”. The energy to move stuff around is an excess cost which adds to climate breakdown. This will impact the value of stock prices for companies currently leading the Market Capitalization parade.
Taking a look at the current market..
A practical trading application of the items listed above is shown below with market direction of the 50 day moving average for each market and its adjusted measurement values. Markets evaluated are S&P 500, Nasdaq 100, FANG, and CRB (commodities. The three adjusted columns for forecasting are calculated by dividing market prices by either US10 year rates, the Dollar, or Gold.
Market Base Mkt US10Y Adjusted Dollar Adjusted Gold Adjusted
S&P 500 UP DOWN UP UP
Nasdaq 100 UP DOWN UP UP
FANG UP DOWN UP UP
CRB UP DOWN UP UP
What you see as far as the bubble collapsing is that only interest rates are pushing for the collapse so far. The dollar and gold are trailing but will be key confirming factors. The CRB is the hot number and is the number pushing interest rates higher.