weekly market update- predictive correlations and more

In this week’s update, I display two predictive correlations that would fit with an imminent large decline in stock prices in the US (and beyond). I will also review several markets that recently barely made a new high, then plunged.

I think I will use fewer words this week. Either you can see the correlations here or not. What the specific correlations are and why they often work will take time to detail. Let’s skip that and just focus on the obvious visuals showing predictiveness.

When the dataset on the bottom (the blue line on the white background) is at historically low levels and then starts to rise (as marked in orange), what consistently has happened right after those orange lines in the price chart with the blue background? You can assess for yourself why I would have placed the red line and what followed soon after that red line in the top chart.

This is a stack of 3 charts. The tip and bottom are “breadth” measurements within the US Nasdaq stock market. The flatter line in the middle is the actual prices of the US Nasdaq stock index.

You will notice two big blue periods of time. Note also the down-sloping blue line at the top of those time periods (plus the up-sloping black lines).

When was the best time to buy Nasdaq stocks across the months shown above? The green time period, right?

What percentage of stocks are rising in the US across the last 150 days? Within the S&P 500, about 45% are above their 150-day average. However, within the Nasdaq, 72% are above their 150-day average. In both cases, there was MUCH “wider participation” in the rally as of about 1 month ago.

Wouldn’t it be interesting if within just a few days, more than 80% of stocks in the US were below their 150-day averages? Wouldn’t it be even more interesting if we are one or more years away from the next significant rally in US stock prices?

Today, the US stock market made a new short-term high, then plunged. The new high was less than 0.1% higher than the prior high on June 8th.

Investors in European stocks created a similar high in early June. The shape price movements has been similar to what is visible for US stocks.

However, back to the topic of breadth, we can see that investors in European stock did not produce a new high today.

Here is one last stock market (of Japan). This chart shows a smaller time period. Similar to US stocks today, Japanese stocks today BARELY exceeded the high of June 23rd and then plunged sharply.

Above is a chart of oil prices. They peaked the same day as Japanese stocks (June 23rd). After a few weeks of decelerating upward momentum, oil plunged last week. After a partial recovery, oil prices plunged sharply again today.

This is a chart of the biggest single currency market in the world. Note that currency market involve far more value (wealth) than bond markets and bond markets involve far more value (wealth) than stock markets. Prices today barely exceeded the highs last week on July 9.

Gold reached an extreme a few hours prior to the previous market. It has fallen sharply in recent hours.

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