I wanted to share some longer-term market views with you and where we may be headed in 2018.
If you take a look at 2017 you’ll see that the S&P 500 has really stayed in a nice upward channel. It has followed the 50-week moving average higher with just minor corrections on the way up. There haven’t been any huge moves to the upside that would stretch the markets way above the 50-week moving average. If that had been the case, one would expect a sharp correction or many weeks of sideways consolidation. This would allow the moving average to catch up to the price.
While the move up has been steady it has now gotten somewhat stretched above the 50-week moving average. There is a chance that we have already put in an intermediate top and we could now begin a move into an intermediate cycle low. This move should be relatively short-lived, perhaps a week to three weeks in duration. I’m not expecting a sharp scary move to the downside at this time.
The chart of the NASDAQ Composite Index shows the same story, not exceptionally stretched above the 50-week moving average. Sentiment levels are not at extreme levels nor are we seeing extreme complacency like what happened with Bitcoin. We may see a correction of 2-3 weeks prior to the earnings season.
If we extrapolate out with the markets moving in the same trajectory, this market could continue its move into next year.
My belief is that the markets will accelerate because I believe that we are now entering a bubble phase. If we are moving into a more aggressive phase of this bull market, it could preclude a final market top. We will see a sharper advance, stretching way above the 50-week moving average.
The trend should become much more parabolic with the chances of a bull market top being created sometime in the summer of 2018.
My next post will be dealing with the potential for a new bear market for the U.S. Dollar and this could impact the Peso as well.