We anticipate US stocks have entered a consolidation phase lasting a minimum of several months.
Stocks have performed strongly off the back of the Presidential election. This has served to clarify where things are heading. Any short term ambiguity has now been cleared away. The recent top and pullback also coincides with the topping phase of the eight year stock market cycle that has continued for over 50 years. Note while March 2017 is the month time window for the peak, cycles of this length can take 1-2 years to complete their cycle top. Take the stock market top in 2000. While the highs occurred by March 2000. This was well before the 8 year cycle high of 2001. The then markets chopped around for another year close to the all time highs before pealing way into their 2003 lows.
The next 8 year cycle low will occur some time in 2025 and by that time stock market will be equal to, or lower than 2009 stock market lows. A lot will have changed by then – politically, economically and socially.
We note the growing political, social and economic cross-currents that have been building over the last 2 decades. This is typical of major tops and is reflected by the difficulty investors and business people have in making business and investment decisions.
So anticipate US stocks pulling back between now and May to August of this year. into the consolidation lows. The pullback should be quite steep and volatile with potential targets of DJIA 19500 – 19900, SP500 2000 – 2100. We note US money supply growth is declining rapidly which underpins the softening stock market.
Following the pullback we will see, once again, markets rise to new highs. The nature of the rise we foresee being accompanied by extremely bullish news. Typically, major corporate tax cuts would fit with this picture, rising money supply growth and a rising, extremely bullish euphoria. This coming run should take the DJIA above 23000 to 25000.
We believe this is the last gasp of The End of the Long Game 2009-2018 and there is a high probability that it is ending in a 1929 style stock market blow off. Ironically the same factors that caused the 1929-1933 Great Depression are also causing the current bull market rally. This will be the peak in a 230 year cycle of human endeavor. We are witnessing history, a history that will stand for generations to come.