Equities, Bonds and Crude Oil May Provide Summer Fun in Dog Days

Dog days

Here we are in the middle of the dog days of summer as we wait on yet another year of important time windows. It seems like we have them every year. Last year the September/October window was 262 weeks off the 2007 top at the same time it was 10 years off the Internet bear market bottom on Oct. 9-10, 2002 and Oct. 12, 2007. The Dow topped within a week of the anniversary and we ended up with a correction into the middle of November. The net conclusion should not have been the time windows didn’t work; rather something much larger was developing to invalidate those time windows. We’ve been vindicated because the time windows did hit on schedule and according to our Gann/Fibonacci methodology markets are a lot higher as a result of taking out those time windows. This year is another story.

On a monthly scale we are one month shy of 161 months off the top of the Internet bubble (see chart below). By itself that might not mean so much but around the same time we’ll hit 233 weeks off the 2009 bottom. Put those two together and we might have something. We are now about a month away from that convergence. Just recently markets have taken out two lesser windows. First was the 161-day window off the low from Nov. 16, which some of you will interpret that date as 16.11. It has a nice ring to it. Very few sectors responded to that window. But we are now also on the back end of 1,597 Fibonacci calendar days off the March 2009 Haines Bottom.

NASDAQ Composite (monthly)

NASDAQ Monthly

 

 

 

 

 

It’s important to take note of the fact that windows are working whether they validate or not. If I were to show you a chart of the 1950’s, we had numerous violations of 161-day windows with the net result a booming bull market which kept charging higher. I’m not saying we are replicating the 1950’s because I don’t think we are. I think we are replicating the 1930’s and it’s important to realize from the bottom in 1932 we experienced a five-year bull market until the peak in 1937 and retest in 1938. If we look to the bottom on Nov. 21, 2008 we are working on five years. This is one of the reasons why I’m so concerned about this market peaking. It’s been enough time. We also have a handful of issues which could derail the market. We know the market loves the idea of Fed stimulus and they continue to respond to it. But how many of you realize how much the market despises the debt ceiling debate? Not that I want to get into politics but I believe they have to get a deal done by the end of September. Gridlock in Washington is as tight as we’ve ever seen it. The sides are digging in and I just heard the House GOP will never go along with a rise in the debt ceiling if it means helping to fund Obamacare. How many times have they tried to repeal it? This time they may actually have some leverage.

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