Have stocks reached their Everest peaks?
Stocks (some at least) powered even higher and my comparison with Everest is highly appropriate. The Dow last week made a new ATH just poking above the Jan 2022 37,000 high. But that was the only major index to do so – the Russell 2000, S&P 500 and the two Nasdaqs (the 100 and the Composite) are trading below their ATHs. So there exists a potentially hugely negative non-confirmation in the US indexes.
I read that there are so many climbers on the Everest trails that there is now a massive litter problem there. Mount Everest is now massively over-crowded.
Similarly, with everyone now a stock bull, shares in the Magnificent Seven (that are leading the expeditions), along with a few other highly bought others, are very over-crowded. Who wants to jump off the cliff into a deep crevasse when new highs are being set almost every day?
But with just about every measure of sentiment flashing danger signals, how much longer can this persist? Here is the 2-year high cycle in the Dow I showed previously
if the cycle is still valid, we should expect a major reversal in the next few days/weeks
All attention is being on the M7 and a few other high flyers, but what about the rest of the market? Here is a revealing article that lies below the surface of the MSM headlines
So, former red hot sectors including ‘green’ start-ups have slumped (as I have been pointing out here). Where has the bullish mania for these stocks vanished to?
Of course, financial and economic optimism on ‘green-ness’ has met the hard rock face of reality. These shares did not even make it to Base Camp! The limitless cash offered to these start-ups has been blown on their many unrealistic ventures. The lagging political forces still supporting Net Zero will have to follow suit eventually.
last week, Crude markets reversed strongly and are back on track to test my upper targets. Likewise Gold and Silver both reversed and kick off their wave 3 of 3 advances.
T-Bonds surged on the interest rate expectations but are near a short term top. But the trend for lower rates is set. So will shares and bonds keep trending in synch next year as they have done for many months? My guess is that they should diverge with lower stocks next year and thus a flight to safety into Treasuries (and Gold).
I am away now for family reasons and will try to keep posting at least something every week.