According to my risk summation system, the days this coming week with the highest risk of a turn in or acceleration of the current trend in the DJIA are Wednesday June 1st and Friday June 3rd.
Last week the highest risk day, Tuesday the 24th, tagged the DJIA low for the week, but the important low appears to have been the one just after the end of the previous week's risk window midday on Friday May 27th.
All the touts predicting a big rally last week got it right, which just shows that sometimes it pays to follow the consensus.
The plot below shows my crude, rules are optional E-Wave way of looking at the daily DJIA. If the upper red trend line is taken out, my count is probably crap which wouldn't really shock me all that much given my fast and loose approach to applying the formal rules. I find it's just not worth overworking EWave since just about every count you see gets edited repeatedly. As I've said before, EWave should always be done in pencil with an eraser at hand.
The rally last week produced three gaps in the hourly DJIA as can be seen in the top plot. I am attributing the ferocity of the rally to Powel prevaricating on the tightening strategy. Other FED lackeys which spoke last week basically said that this so called "tightening" cycle would "pause" in September with the FED funds rate still at something like a negative five percent. That's not tightening, that pumping with the discharge valve wide open. It's no wonder the market rallied. If this new kinder and gentler strategy is born out in the FED meeting in a couple of weeks, then Katy better bar the door to stop the bull stampede. You can see the FED taking their foot off the gas peddle in the turn up at the end of plot of the 2 year note below.
As I've said before, Powell is an Arthur Burns, not a Paul Volker. Powell has just been re-nominated I assume to serve another 4 years until 2026, so it doesn't look like this inflation mess is going to be fixed unless he drops the sheep's clothing and shows his stripes, or he gets fired by the president for "cause" which doesn't look likely before 2024 given the current POTUS just extended Powell's contract and doesn't like saying mea culpa.
Regards,
Douglas
