Sugar Juice Propped up Failing Biden Economy – Ed Dowd
Ed Dowd discusses the economy, Government reports, Federal Reserve, stock markets, expectations for 2025, and more.
Gold/Silver: 2024 Q3 Precious Metal Contracts
On December 12, 2024, the Office of the Comptroller of the Currency released its Quarterly Report on Bank Trading Activity and Derivatives Activities. Figure 17 on PDF page 42 shows notional amounts of precious metals contracts held by Insured U.S. Commercial Banks and Savings Associations. These institutions continue to move into precious metals contracts.
Note that beginning January 1, 2022 the largest banks are required to calculate their derivative exposure amount for regulatory capital purposes using the Standardized Approach for Counterparty Credit Risk (SA-CCR). Under SA-CCR gold derivatives are considered precious metals derivative contracts rather than an exchange rate derivative contract, resulting in an increase in reported precious metals derivative contracts compared with prior quarters. Refer to the call report instructions and OCC Bulletin 2020-7, “Standardized Approach for Counterparty Credit Risk: Final Rule, “for additional information on the SA-CCR exposure calculation.
Dow/S&P500/NASDAQ: Last Quarter of 2024
On December 9, 2024 it was noted that the last quarter of 2024 was expected to be a market peak period. Volatility was also expected to increase before markets decline. Previous market peaks with +2 standard deviations in the 4th quarter include 1965, 1968, 1999, and 2021. As of December 26, 2024 the Wilshire 5000 to GDP Ratio was 203.69%. A decline is still expected in 2025.
Note that this information is for educational purposes only and not a recommendation.
Charts courtesy of StockCharts.com.
Dow/S&P500: December Decline and Rally
1971 – 1973
In April 1971, the Buffett Indicator moved above its +1 standard deviation range. It continued to move along this range until January 1973 when the indicator, Dow and S&P500 started to decline. This decline accelerated after the January 20, 1973 U.S. Presidential Inauguration. Note that a quick decline and rally occurred in the Dow and S&P500 during December 1972.
2021 – 2024
In November 2021 the Buffett indicator hit its peak above the +2 standard deviation range before moving lower in 2022. During the U.S. Presidential election week of November 4, 2024 the indicator moved above its +2 standard deviation range again. Note that the December 2024 decline and rally is similar to what occurred in December 1972. A long term decline would be expected to start after the January 20, 2025 Presidential Inauguration.
Note that this information is for educational purposes only and not a recommendation.
Charts courtesy of StockCharts.com.
Dow: Close below 41,647
On June 3, 2024 the Engrbytrade™ 1974 Dow Model was updated to reflect a 7 point structure developed in 1973 – 1974. At that time the Dow was expected to follow the 1974 peak and start a decline. In late May 2024, the Dow failed to drop below the April 2024 low and continued to move higher. This extension of the upward trend has continued until now with the Dow positioned to continue its decline. Using the current Engrbytrade™ 1974 Dow Model a close below 41,647 would indicate a continuation of the decline going into 2025.
Note that this information is for educational purposes only and not a recommendation.
Charts courtesy of StockCharts.com.
Economy/Interest Rates: Trade Wars = Recession
U.S. and Canada Trade Wars = Recession | Steve Hanke and Jimmy Connor
Steve Hanke, Professor of Applied Economics at Johns Hopkins University discusses the recent decision by the Fed to cut rates, for the third time, the impact of a Trade War between the U.S. and Canada.
Note that this information is for educational purposes only and not a recommendation.
Dow/S&P500/NASDAQ: IBM Parabolic Structure
Over the last several years Market Makers have been working on a parabolic structure for IBM. On April 27, 2024 it was noted that this structure was developed based on a similar version Specialists built between 1986 and 1987. Structural calculations for the 2017 to 2024 IBM chart are similar to that of 1986 to 1987. It appears Market Makers are planning on a decline. Whether it is a 1987 version, or something less dramatic, remains to be seen.
“Like the musicians in an orchestra, the specialists who conduct the movements of each of the Dow stocks work on behalf of their own interests while at the same time working for the fulfillment of the objectives of the system as a whole.”
Richard Ney, Making it in the Market, 1975, page 98
Note that this information is for educational purposes only and not a recommendation.
Charts courtesy of StockCharts.com.
Interest Rates: TLT Structure
On December 14,, 2024 it was noted that the 30-Yr Treasury rate was expected to move lower in 2025. At the moment the Fed is in the process of repeating their 2007 rate cut pattern, as shown in the following NASDAQ chart. The second TLT chart reflects an expectation of a rate cut on December 18th. Using the 2007-2008 TLT structure as a guide, a move upward going into January 2025 would be expected. Note that a 5th rate cut occurred on December 11, 2007.
Note that this information is for educational purposes only and not a recommendation.
Charts courtesy of StockCharts.com.
Interest Rates: 30-Yr Treasury Yield Descending Triangle
On November 26, 2024 it was noted that there was a 70% chance of a sharp decline in the 10-Yr Note rate by year end. Looking at the 30-Yr Treasury rate there is an expectation that it will move lower in 2025. This is based on the following:
1. The 30-Yr Treasury descending triangle structure.
2. Futures data from net Total Reportable Positions on the 30-Yr Bond indicates they are significantly larger than what was recorded in 2019.
3. A significant increase in volume in products such as TLT.
Note that this information is for educational purposes only and not a recommendation.
Bond related charts courtesy of StockCharts.com.
Crude Oil: Heating Oil Sharp Decline
On November 22, 2024 it was noted that Heating Oil (NY Harbor ULSD No. 2 Diesel) was expected to decline going into 2025. This is based on Commercial Trader positions, which are currently above the previous reading recorded on February 25, 2020. The descending triangle formation indicates a sharp decline is expected. Stock markets are also expected to fall.
Note that this information is for educational purposes only and not a recommendation.
$HOIL chart courtesy of StockCharts.com.
Dow/S&P500/NASDAQ: NAAIM Index – December 11, 2024
Investment managers are moving in the direction of being fully invested as the Semiconductor Index continues to move higher. On November 27, 2024 the NAAIM Index hit 98.93, and two weeks later it hit 99.24. This occurred during a period of time while the Semiconductor Index was moving higher, and the S&P500 continued to decline. A similar situation occurred in 2018 when the NAAIM Index numbers hit 90.19 on September 12, 2018 and 90.73 on September 26, 2018. The Semiconductor Index peaked on September 20, 2018, and the S&P500 peaked on September 21, 2018. This was followed by a 19% decline in the S&P500.
Note that this information is for educational purposes only and not a recommendation.
Semiconductor Index charts courtesy of StockCharts.com.
Dow/S&P500/NASDAQ: Repeat of the 2020 Market Collapse
Another pandemic collapse is planned to start in January 2025. If successful this will be a repeat of the 2020 market collapse on a much larger scale.
Chart courtesy of StockCharts.com.
Dow: Eight Point Trading Model – December 10, 2024
The Dow is currently in the process of completing a short term Engrbytrade™ Eight Point Trading Model structure, as shown in the following 5-minute chart. Key points are identified based on the Dow 30 cash futures market chart. In the past this structure has typically been seen as a recurring event within Dow futures market intraday structures. A rally is expected upon completion of this structure.
Note that this information is for educational purposes only and not a recommendation.
Dow chart courtesy of StockCharts.com.
Dow/S&P500/NASDAQ: Buffett Indicator New High
On November 28, 2024 it was noted that as of November 9, 2024 the Buffett Indicator (Market Valuation to GDP) was 209%. As of December 5, 2024 the Longtermtrends.net Buffet Indicator new high hit 209.25%. This is well above the last peak in November 2021 with a value of 197% . Both peaks are above the +2.2 standard deviation range. With respect to positioning of markets, the last quarter of 2024 is still expected to be a market peak period. During this time frame volatility is still expected to increase before markets decline.
Note that this information is for educational purposes only and not a recommendation.
Charts courtesy of StockCharts.com.
Dow: Conventional Technical Indicators
On December 3, 2024 preliminary calculations indicated the Dow could move up to 46,477 before moving lower. A review of conventional technical indicators show the Dow moving up to 47,375 before moving lower. This is based on a repeat of the structure developed during October – November 2021. A year-end rally is still in progress.
Note that this information is for educational purposes only and not a recommendation.
Stock chart courtesy of StockCharts.com.
Dow/S&P500/NASDAQ: NAAIM Index – Repeat of 2023
As of December 4, 2024, the angle of points 1, 2, and 3 on the following NAAIM Exposure Index structure is similar to points 4, 5, and 6. In 2023 and 2024 extremely large block trades crossed the tape around the dates noted below. The S&P500 and NASDAQ 100 continue to move higher. A repeat of 2023 is expected as the Dow completes an ascending triangle.
Note that this information is for educational purposes only and not a recommendation.
Stock chart courtesy of StockCharts.com.
Dow: Fibonacci Measurements
On December 1, 2024 a review of S&P500 Fibonacci measurements based on the Buffett Indicator Model was conducted. The following charts also show the October 2022 to November 2024 Dow Fibonacci structure is similar to that of March 2020 to January 2022. Preliminary calculations indicate the Dow could move up to 46,477 before moving lower.
Note that this information is for educational purposes only and not advice or a recommendation.
Scanning for block trades should be available on most major trading platforms.
Charts courtesy of StockCharts.com.
S&P500: Fibonacci Measurements
On November 28, 2024 a review of the Buffett Indicator Model was conducted noting that the last quarter of 2024 is still expected to be a market peak period. The Buffett indicator valuation is still in the +2.2 standard deviation range. The last time this occurred in late 2021, the S&P500 peaked in January 2022 before declining 27.5%. Fibonacci measurements show the October 2022 to November 2024 S&P500 Fibonacci structure is similar to that of March 2020 to January 2022. Preliminary calculations indicate the S&P500 could move up to the 6200 range before moving lower.
Note that this information is for educational purposes only and not advice or a recommendation.
Charts courtesy of StockCharts.com.
Dow/S&P500/NASDAQ: NVDA Block Trades
Between June and November, 2024 several large NVDA block trades crossed the tape above 119, as shown in the first chart. It appears Market Makers are conducting a merchandising operation by distributing stock to intuitions, pension funds, etc. Prior to Market Makers, Specialist performed the same operation.
“The cultural response of most investors is based on the assumption that “if somebody is buying, somebody is selling; not for a moment is it recognized that, in most cases “if somebody is buying,” it’s the specialist who is selling; and if “somebody is selling,” it’s the specialist who is buying.
Richard Ney, Wall Street Gang, 1974, page 150
Based on trades within the NVDA ascending triangle, a move upward would be expected going into December 2024. The following Fibonacci charts show today’s NVDA structure is very similar to that of CSCO in 2000. It should also be noted that overall, a market peak is expected in December based on the recent Buffett Indicator Review on November 28, 2024.
This information is for educational purposes only and it is not advice or a recommendation.
Scanning for block trades should be available on most major trading platforms.
Charts courtesy of StockCharts.com.
Dow/S&P500/NASDAQ: NAAIM Index – Big Block Trades
As of November 27, 2024 point 3 on the following NAAIM Exposure Index evaluation is in a position similar to where it was on November 22, 2023. This is based on the number of big block trades within an ascending triangle between September and November 2024. A similar big block trade pattern occurred within a falling wedge between September and November 2023. Apple is shown below to illustrate this. Investor optimism is moving higher, but it has not moved into the extreme greed range. It appears there is still room to move upward going into December 2024.
Note that this information is for educational purposes only and not a recommendation.
Stock chart courtesy of StockCharts.com.
Dow/S&P500/NASDAQ: November Buffett Indicator Review
On October 20, 2024 it was noted that as of August 31, 2024 the Market Valuation to GDP was 209%. As of November 9, 2024, the Buffett indicator valuation metric stands at 209%. This is above the November 2021 value of 197%. It is significantly higher than the September 5, 1929 value of 130%. For additional information on this topic, John P. Hussman, Ph.D. provides an in depth perspective in his November 2024 market blog.
With respect to positioning of markets, the last quarter of 2024 is still expected to be a market peak period. This is based on the Buffett indicator valuation being in a +2.2 standard deviation range. During this time frame volatility is expected to increase as markets typically move higher in December before they decline.
Note that this information is for educational purposes only and not a recommendation.
Charts courtesy of StockCharts.com.
Interest Rates: Trader Net Positions
On September 28, 2024 it was noted that there is a 70% chance of a sharp decline in the 10-Yr Note rate by year end. This was based on the 2024 descending triangle that is similar to what occurred in 1982 and 2000. 10-Yr Non-Commercial Trader Net positions continue to remain in an extreme position. The expectation of rates starting a decline before the end of 2024 is still in place.
Note that this information is for educational purposes only and not a recommendation.
US10Yr Note chart courtesy of StockCharts.com.
Dow/S&P500/NASDAQ: 2007 and 2024
As of November 21, 2024 the ICE BofA US High Yield Index Option Adjusted Spread Index was 2.61. This is very close to where it was on January 24, 2007 when the index hit 2.630. Using this index reading for some insight to a path forward, a comparison was made between 2007 and 2024. This comparison provides similarities shown in the following S&P500 charts. The 2022 to 2024 chart structure is a smaller replica of what was developed between 2001 and 2007. Based on the ICE BofA Index readings and 2007 S&P500 chart, a brief upcoming decline should be expected before a market rally begins. After the short sharp decline on February 27, 2007, tech stocks started to rally until the end of 2007. It appears there is still room for markets to move higher.
Note that this information is for educational purposes only and not a recommendation.
Charts courtesy of StockCharts.com.
US Dollar: Moving Higher
Non-Commercial trading data used for Canadian Dollar reviews has been under observation since mid-June 2024. In this case intermarket relationships would support the U.S. Dollar moving higher.
On November 4, 2024 it was noted that a decline in crude oil prices was expected. Any significant change in the U.S. Dollar was inconclusive. Prior to this, a review of the Euro was performed on October 25, 2024 noting that the U.S. Dollar was expected to move lower. The Canadian Dollar was still under review at this point.
On October 15, 2024 it was noted that a decline in gold was expected in 2025. In support of this it was noted on October 12, 2024 that a detailed review of Non-Commercial Gold Futures Trader positions revealed gold is currently in the process of completing a 2016 to 2024 three peak Non Commercial futures trading sequence. This would result in the U.S. Dollar moving higher.
As of November 19, 2024 Euro non-commercial and commercial futures trading data does not indicate the euro is expected to move higher. Overall, intermarket futures trading data currently indicates the U.S. Dollar is expected to move higher.
Crude Oil: Commercial Trader Positions
On November 4, 2024 it was noted that a descending triangle was developing that is similar to what occurred between 2017 and 2019. In addition to this a similar setup occurred between 2013 and 2014.
NY Harbor ULSD No. 2 Diesel provides a predictive structure using commercial trader positions. Prior to the 2014 and 2020 declines, peak commercial trader positions were identified in the following Commitment of Traders data chart. This same setup is currently under development within a 2022 – 2024 descending triangle. A decline would be expected to occur going into 2025.
Note that this information is for educational purposes only and not a recommendation.
WTIC charts courtesy of StockCharts.com.
