A Trend Turn is Coming to Stocks

By: Robert McHugh | Mon, Jul 7, 2014
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Stocks popped higher Thursday, July 3rd on light pre-holiday volume in a shortened trading session. The Industrials and S&P 500 hit a new all-time high again, with the Industrials breaking above the 17,000 threshold and the S&P 500 closing in on 2,000. What we are watching for is a key reversal day and week, where the S&P 500 hits a new all-time high during the day, then closes down, and closes lower for the week. With the S&P within spitting distance of 2,000, we expect it to reach that level over the next two weeks, and then put in a reversal day and week. That is because we have three pretty good cycle turn indicators all in agreement; all suggesting a significant trend turn is likely to begin sometime over the next two weeks. Key reversals can be a sign of such a turn. Perhaps we will see a VIX Sell signal accompany this turn as well. Hard to say but the VIX came within a whisker of a Sell set up Thursday, July 3rd. The best indicator confirming that a top has arrived pointing to the start of the next significant declining trend in stocks would be a new Sell signal in our key trend-finder indicators, which we update daily and present to our subscribers at www.technicalindicatorindex.com.

It is looking as if the coming turn as forecast by our next Phi Mate Turn date, the next Bradley model turn date, and a Fibonacci Cluster window is pointing for a top in stocks. We show a chart of this Fibonacci Cluster turn window in this weekend's 60 page report on pages 12 and 13, available only to subscribers. That top will likely be the completion of wave c-up. If so, this means the S&P 500 should rally toward the 1,980 to 2,000 range over the next two weeks to finish that pattern, then top, then drop hard as wave d-down takes over. The S&P closed at 1,985 Thursday, but could go a bit higher off weekend media exuberance over the Dow reaching17,000 and also what was perceived to be a good jobs report Thursday (which was not that great).

The McClellan Oscillator had a small change Thursday, up only 3.92, suggesting a large price move is likely this coming week.

As for the June Jobs report, on Thursday, July 3rd, the Bureau of Labor Statistics of the Labor Department reported that 288,000 new non-farm payroll jobs were created in June by the economy, and the unemployment figure dropped to 6.1 percent. 33,000 of the new jobs were in food services and drinking places, retail trade employment rose by 40,000, with 8,000 new jobs in building materials and garden supply jobs, and 10,000 were in temporary services jobs. That is 91,000 minimum wage or near minimum wage jobs. These are not family supporting wage jobs.

Then, if we look at the number of new jobs they think were created by new businesses they think started up in June, they guessed that 121,000 new jobs of the 288,000 reported came from this imagined CESBD source. So, if we consider all of this, the economy really created somewhere between 76,000 and 167,000 family supporting jobs, which is an improvement over past months, however was still at best a breakeven with population growth, and at worst far short of population growth.

More alarming was this figure: The number of persons working part-time for economic reasons (i.e. because they could not obtain gainful full-time jobs) rose by 275,000 to 7.5 million in June. That is a staggering increase in one month in forced part-time workers who would prefer full time work. What the June reports says is it continues to be extremely difficult to find family-supportive-wage career jobs, and that our economy is failing to generate enough of these quality jobs. It means consumer financial stress levels continue to be fed by the employment picture. But, the stock market did not care, and marched higher Thursday toward our coming cycle turn top due this month.

On Monday, June 30th, Gold broke out higher from a small symmetrical triangle the previous week which looks like a sideways wave {b} inside a three wave rally toward 1,370ish. If so, Gold is now in wave {c} up, headed for the 1,350 to 1,370ish area. Once that level is reached, Gold should decline one more time to finish its corrective decline from September 2011. Gold's pattern would look best with one more decline toward 1,200 or below. The alternate is that Gold's bottom from 2011 is in and Gold is starting a long-term mega rally. Any path Gold chooses to follow short-term should be within the context that Gold will be rising in a dramatic wave 5-up within a few months at the latest.

 


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Dr. McHugh's new book, "The Coming Economic Ice Age, Five Steps to Survive and Prosper," is available at amazon.com at http://tinyurl.com/lypv47v

"Jesus said to them, "I am the bread of life; he who comes to Me
shall not hunger, and he who believes in Me shall never thirst.
For I have come down from heaven,
For this is the will of My Father, that everyone who beholds
the Son and believes in Him, may have eternal life;
and I Myself will raise him up on the last day."

John 6: 35, 38, 40

 


 

Robert McHugh

Author: Robert McHugh

Robert D. McHugh, Jr. Ph.D.
Main Line Investors, Inc.

Robert McHugh

Robert McHugh Ph.D. is President and CEO of Main Line Investors, Inc., a registered investment advisor in the Commonwealth of Pennsylvania, and can be reached at www.technicalindicatorindex.com. The statements, opinions and analyses presented in this newsletter are provided as a general information and education service only. Opinions, estimates and probabilities expressed herein constitute the judgment of the author as of the date indicated and are subject to change without notice. Nothing contained in this newsletter is intended to be, nor shall it be construed as, investment advice, nor is it to be relied upon in making any investment or other decision. Prior to making any investment decision, you are advised to consult with your broker, investment advisor or other appropriate tax or financial professional to determine the suitability of any investment. Neither Main Line Investors, Inc. nor Robert D. McHugh, Jr., Ph.D. Editor shall be responsible or have any liability for investment decisions based upon, or the results obtained from, the information provided.

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