6 replies to this topic

[Douglas]

According to my turn probability summation system, the day with the highest likelihood this coming week of seeing a turn in or acceleration of the current trend in the DJIA is Friday May 8th.  

 

Last week's turn windows shown in the marketwatch.com plot below in red covered pretty much the whole cotton picking week which I must admit was pretty useless, but the Friday May 1st turn window did catch what I believe may have been an important top of some degree with this coming Monday's action needed to confirm this.   I present charts further below to justify this bearish bias.

 

 

Will this year live up to the adage to sell in May and go away?  The SPX AD line below would certainly seem to make the case for pending weakness with two divergences.  Of course, a sharp move up driven by some POTUS tweet could "heal" these divergences, but all things being equal, the more likely outcome should be a correction of some degree.

 

 

Speaking of nasty looking, the 30 year Treasury weekly yield curve below is once again banging on the door of 5% with the rising triangle saying higher rates could be just around the corner.  Of course, the optimists in the crowd will see beauty where I see a beast and point to the three peaks in rates just under the top line and say triple top which should lead to sharply lower rates in the months ahead.  Depending on your bias, there's something for everyone in this chart.  Given the surge in inflation from the Not War in Iran, it's hard for me to see lower rates in the short term, but then again POTUS tweets and Warsh at the Fed helm may have different ideas.

 

 

Regards,

Douglas

 

 

[slupert]

According to my turn probability summation system, the day with the highest likelihood this coming week of seeing a turn in or acceleration of the current trend in the DJIA is Friday May 8th.  

 

Last week's turn windows shown in the marketwatch.com plot below in red covered pretty much the whole cotton picking week which I must admit was pretty useless, but the Friday May 1st turn window did catch what I believe may have been an important top of some degree with this coming Monday's action needed to confirm this.   I present charts further below to justify this bearish bias.

 

 

Will this year live up to the adage to sell in May and go away?  The SPX AD line below would certainly seem to make the case for pending weakness with two divergences.  Of course, a sharp move up driven by some POTUS tweet could "heal" these divergences, but all things being equal, the more likely outcome should be a correction of some degree.

 

 

Speaking of nasty looking, the 30 year Treasury weekly yield curve below is once again banging on the door of 5% with the rising triangle saying higher rates could be just around the corner.  Of course, the optimists in the crowd will see beauty where I see a beast and point to the three peaks in rates just under the top line and say triple top which should lead to sharply lower rates in the months ahead.  Depending on your bias, there's something for everyone in this chart.  Given the surge in inflation from the Not War in Iran, it's hard for me to see lower rates in the short term, but then again POTUS tweets and Warsh at the Fed helm may have different ideas.

 

 

Regards,

Douglas

 

 

They like to forget about inflation  Shiller PE Ratio - Multpl

[slupert]

 

According to my turn probability summation system, the day with the highest likelihood this coming week of seeing a turn in or acceleration of the current trend in the DJIA is Friday May 8th.  

 

Last week's turn windows shown in the marketwatch.com plot below in red covered pretty much the whole cotton picking week which I must admit was pretty useless, but the Friday May 1st turn window did catch what I believe may have been an important top of some degree with this coming Monday's action needed to confirm this.   I present charts further below to justify this bearish bias.

 

 

Will this year live up to the adage to sell in May and go away?  The SPX AD line below would certainly seem to make the case for pending weakness with two divergences.  Of course, a sharp move up driven by some POTUS tweet could "heal" these divergences, but all things being equal, the more likely outcome should be a correction of some degree.

 

 

Speaking of nasty looking, the 30 year Treasury weekly yield curve below is once again banging on the door of 5% with the rising triangle saying higher rates could be just around the corner.  Of course, the optimists in the crowd will see beauty where I see a beast and point to the three peaks in rates just under the top line and say triple top which should lead to sharply lower rates in the months ahead.  Depending on your bias, there's something for everyone in this chart.  Given the surge in inflation from the Not War in Iran, it's hard for me to see lower rates in the short term, but then again POTUS tweets and Warsh at the Fed helm may have different ideas.

 

 

Regards,

Douglas

 

 

They like to forget about inflation  Shiller PE Ratio - Multpl

 

S&P 500 Price to Sales Ratio - Multpl

[Douglas]

slupert, apparently the new Fed head, Warsh, is planning to start using a "trimmed" average inflation measure instead of the Personal Consumption Expenditures (PCE) index preferred by Powell.  This trimmed average excludes outlier data which lately have been high values, so this measure will have a downward bias, surprise, surprise, surprise.  Warsh is ultra-rich and is probably even further removed from the reality faced by the bottom half of the "K" in the economy than even Powell was.

 

I am still convinced that at some point in the misty unseeable future the Fed/Treasury amalgamation's  ignoring inflation and just printing truck loads of funny money is going to matter.  If I'm right, sooner or later the dollar will have a Willy E. Coyote experience that will force the Fed and the Treasury printers to be fiscally responsible like it or not.  Heck if I know when, but unfortunately it might be in my lifetime.

 

Regarding your P/E and P/S curves, you need to adjust those for interest rates minus the actual inflation rate.  In the good ole days that number was positive, now it's very solidly negative if you use "real" inflation data and not the BLS baloney numbers.  Negative real rates make very high P/E and P/S values seem more reasonable.  Companies basically get to pay their debts and their employees with increasingly more worthless paper - what a deal.

 

Regards,

Douglas

Edited by Douglas, 03 May 2026 - 04:09 PM.

[Douglas]

Yesterday, the 30 year T-Bond yield poked its ugly head ever so slightly above 5% for the first time in a while.  This is a weekly chart and it does have four more days to tuck its tail and retreat below this level, but for now the triangle is broken to the upside with all its negative implications for long interest rates.   The next opportunity that I see for a run in rates is the next BLS inflation understatement that comes out on Tuesday May 12th (POTUS tweets and Strait of Hormuz developments not withstanding) which should show an inflation rate somewhere between awful and terrible unless these number fudgers use magic math prestidigitation to conjure up some happy numbers.   

 

 

Regards,

Douglas

[slupert]

slupert, apparently the new Fed head, Warsh, is planning to start using a "trimmed" average inflation measure instead of the Personal Consumption Expenditures (PCE) index preferred by Powell.  This trimmed average excludes outlier data which lately have been high values, so this measure will have a downward bias, surprise, surprise, surprise.  Warsh is ultra-rich and is probably even further removed from the reality faced by the bottom half of the "K" in the economy than even Powell was.

 

I am still convinced that at some point in the misty unseeable future the Fed/Treasury amalgamation's  ignoring inflation and just printing truck loads of funny money is going to matter.  If I'm right, sooner or later the dollar will have a Willy E. Coyote experience that will force the Fed and the Treasury printers to be fiscally responsible like it or not.  Heck if I know when, but unfortunately it might be in my lifetime.

 

Regarding your P/E and P/S curves, you need to adjust those for interest rates minus the actual inflation rate.  In the good ole days that number was positive, now it's very solidly negative if you use "real" inflation data and not the BLS baloney numbers.  Negative real rates make very high P/E and P/S values seem more reasonable.  Companies basically get to pay their debts and their employees with increasingly more worthless paper - what a deal.

 

Regards,

Douglas

I have never heard anything about Warsh  changing the format, but that's prety much what they did in the 70's. If you have a linknk please post it. Thank you. I think you read my posts wrong, I am looking for inflation to rise more than they expected. Currently WS is saying to look through the inflation. The Cleveland FED itself says they expect PCE, the FED's preferred inflation gauge to rise to 3.7%.  OUCH!! The bonds market will not be able to look through that., and the equities market will really be taking a gamble if they do. Break evens have been very well behaved that should start to change. I just read your lates post, I don't know if we will see the inflation increase by May 12.But the June data should definitely be affected. (JMHO)

[Douglas]

slupert, the article at this link is where I read about Warsh's new approach to inflation:  Warsh says he wants the Fed to adopt a new approach to measuring inflation - AOL  

 

You are probably right about the May inflation reading on the 12th.  The high oil and fertilizer prices might not have worked their way through the system to show up yet.  Even if they do, I have little confidence that the increase will be fully reflected in the numbers after all the BLS massaging of the data.   Using their substitution technique they'll probably swap the price of horse manure for ammonium nitrate which is rising in price due to the blockade in the Strait of Hormuz. 

 

Regards,

Douglas