Things are Going to Change…

I am on the soapbox tonight. Since January 0f 2009 we have been operating the economy and by extension the markets in an artificial FED mode.

The Covid induced bubble in March of 2020 was the first leg of the end of this 14 year artificial period which ended up with leg two, inflation and leg three, the FED going into overkill.

During all this time the NASDAQ 100 has been the lead dog and grassroots America, represented by the Russell 2000 index has been trampled.

I think we are on the verge of that ending. As a consequence I am watching the Russell closely for a real sign of an anticipated bull market in stocks. If it is going to occur, our model says the Russell will sound the bell. Until that happens we are bullish, but not super bullish. When the Russell takes off that is when our models will put both feet in the fire. Here are two charts that show the story, they are charts using monthly data as the picture is quite large.

The first chart shows the Russell 2000 index divided by the Nasdaq 100. The January 2009 date is clear and the 2020-2023 ending phase stands out. Chart updated through today.

The second chart shows the Russell (RUT) chart and the significance that a breakout above the August 2022 high of 2030 would be. There has been a lot of work put in since the trading bottom setup in May 2022.

There are a number of short term signal opportunities that will develop well before we take out important levels.

And if I am Wrong..

It will happen if the FED loses control of the situation and continues the overkill stance as recent Governor speeches push, in that case the Nasdaq will lose to the Russell but that will occur as the whole market collapses, not due to a bull market.