Stock Market Trend – Eye Opening Information
Courtesy of Chris Vermeulen
My stock market trend analysis is often different from others because I look at both sides from a technical standpoint.
Since the stock market bottom in 2009, equities have been rising, but this train could be setting up to do the unthinkable. Let’s take a look at two possible outcomes.
The Bear Market Trend & Investor Negative Credit
The S&P500 has been forming a large broadening formation over the last 13 years. The recent run to new highs and record amounts of money being borrowed to buy stocks on margin has me skeptical about prices continuing higher.
Take a look at the chart below by Doug Short. This chart shows the SP500 index relative to positive and negative investor credit balances. We are starting to reach extreme leverage again on the stock market. We may be close to a strong correction or possible bear market, but a correction may be all we get. A simple 2-6 week correction may free stocks up to continue higher.
Monthly Bearish Trend Outlook
The average bull market lasts four years (it has been four years).
Poor earnings continue to be released for many individual names across all sectors of the market. While corporate profits may be growing in some of the bigger companies, revenues are not. This suggests that workers are being laid off and companies are cutting costs.
Overall the stock market is entering its strongest period of the year and I do not expect it to turn down all at once. Major market tops are a process that could take 6-12 months to form. After that, a downturn would not surprise me.
Monthly BULLISH Trend Outlook
With the Federal Reserve printing billions of dollars each month and inflating the stock market, a bullish scenario has some legs and makes for the perfect “Wall of Worry” for stocks to climb.
The US dollar will likely continue falling long-term, but I doubt it will collapse. Instead, it will likely grind lower and trade almost in a sideways pattern for years to come.
Major Stock Market Trend Conclusion:
I remain bullish with the trend, but when price and the technical indicators confirm a down-trend, I will happily jump ships and take advantage of lower prices.
This is the big picture using monthly and quarterly charts. These plays will take time to unfold. Many shorter-term opportunities are within these larger moves. We will be trading the shorter term moves regardless of our longer-term predictions.
