According to my turn probability summation system, the day with the highest likelihood of seeing a turn in or acceleration of the current trend in the DJIA over the next week or so is Tuesday after next, May 26th (US stock market closed on Monday May 25th). The next highest system reading is this coming Friday May 22nd with the next lower reading on Wednesday May 20th also high enough to merit being labelled a turn window.
Last week my quick and dirty calculations pointed to this past Friday May 15th as a turn window and on a daily basis it was with a 500+ point DJIA drop from the previous close peak as shown in the marketwatch.com plot below in red, but the actual turn occurred about mid-day Thursday. Of course Friday could turn out to be a low if there's a rally on Monday due to some POTUS stock pumping tweet.
The AD line divergence that I pointed out in last week's post is still there and getting worse. In the plot below I've added the AD volume line showing it is also diverging adding fuel to the fire.
Inflation in anything touched by energy or fertilizer seems to be ripping. The long bond traders have finally woken up to the problem with a break above 5% this past Friday just adding to the market's woes. I got a taste of it myself yesterday when I priced an international flight in the same week, on the same airline and following the same route as last year only to find it cost 33% more. On Friday Warsh became the new Sheriff in town charged with dealing with this outlaw. I was hoping he would join the host of Fed governors on the stump this coming week pontificating on what should be done, but I didn't see his name in the speech rosters. I suppose he will either ignore the inflation, rationalizing it away as "transitory" a la his predecessor, or he will try to add a bit of luster to his new star by taking his horse's reins in his teeth and gun rates higher to curb the enthusiasm (just kidding, there's not a snow ball's chance in hades that will happen).
I think that it is pretty much a dead certainty that he will either explain away and fudge or rejigger the numbers to make it look like there's no problem, but I seriously doubt that my airline ticket will cooperate. Reality, not inflation is the Fed's actual problem. How do you convince folks to ignore their lying eyes?
Regards,
Douglas
Edited by Douglas, 17 May 2026 - 05:51 AM.
