Market Wave Trends and The Secular Outlook

Short-Term Price Wave Trend bearish

5 Day SMA – 35 Day SMA, Trimmed Mean 20%

Intermediate-Term Price Golden Cross Trendbearish

Current – 200 Day SMA, Trimmed Mean 20%

Momentum Wave Trendbearish

5 Day SMA – 35 Day SMA (Cap vs Equal Weight), Trimmed Mean 20%

For more on Cap Weight as a Momentum strategy, read: https://www.morningstar.com/articles/967411/is-market-cap-weighting-a-momentum-strategy-in-disguise

Volume Wave Trendbearish

5 Day SMA – 35 Day SMA, Trimmed Mean 20%

Volatility Wave Trendbearish

5 Day SMA – 35 Day SMA, Trimmed Mean 20%

Wave Trend is measured by the Elliott Wave Oscillator. See details

Outlook

Previously we have discussed in the post We now have much in common with this country the role demographics and lower GDP in pressing in interest rates and inflation.

Additionally, we find that Money Velocity (M2V) which runs 16-18 months ahead of PCE, projects a significant deflation in prices.

 

While money-related easing can prop up asset prices such as stocks it has not been able to combat disinflation/deflation. It basically has failed to help its economy and keep inflation steady to promote economic growth and rising wages.

Late in August, the Fed at long last conceded that it had done everything incorrectly. As Fed vice chair Richard Clarida said while talking about the Fed’s new approach “framework” of Flexible Average Inflation Targeting (or no FAIT), this was “a powerful development in the Federal Reserve’s strategy system and mirrors the truth that econometric models of most extreme business, while basic contributions to money related arrangement, can be and have been off-base.” His view is evident in this chart.

What’s Ahead

Disinflation/deflation will continue to put downward pressure on inflation and P/Es. This all means stocks should move lower, and below-average returns are ahead of us as the larger secular bear unfolds.

search previous next tag category expand menu location phone mail time cart zoom edit close