Curated for the Greater-Good, and have spliced in the charts he is talking about for ease of rumination
McHugh Weekend Report. posted at this juncture for waypoint calibration www.technicalindicatorindex.com
Today's Market Comments:
Stocks plunged Friday, June 10th, diving over 1,500 points the past two days. Micro degree wave 3-down of larger degree Minuette degree iii down has started. This could be a powerful decline, the worst since the Bear market started. There will be corrective bounces along the way, but the trend is down hard, with lower highs and lower lows. Caution is warranted.
Friday's decline was broad-based, on higher volume. The Industrials lost 880, the S&P 500 fell 117, the NASDAQ 100 dropped 437, and the Russell 2000 declined 50. Stocks closed at their low for the day.
The corrective rally from May 20th's low, Micro degree wave 2-up, topped on the latest Bradley model turn date, June 7th.
We show these wave mappings and patterns in updated charts on pages 38, 39, 45, 46, and 49 for the Industrials, S&P 500 and NASDAQ 100. We have updated all charts for all markets we cover in this weekend's newsletter.
There are several large Head & Shoulders topping patterns for the Industrials, S&P 500, and NASDAQ 100, which give downside price target projections for the next declining leg of the Bear market. These are shown in charts on pages 37, 44 and 47.
The Bureau of Labor Statistics of the Labor Department reported on Friday that the Consumer Price Index rose the highest in May that it has risen in over 40 years, from 1981. They reported that it rose 8.6% in May, the fastest pace of rising inflation in over four decades.
The truth is, inflation is rising far faster than 8.6%, however, because entitlement payments from the U.S. government are required to rise an equivalent pace as the CPI, it is cheaper if the actual rate of inflation is understated "officially." Anyone with eyes to see, ears to hear, knows that most food items have risen from 50 to 100 percent in the past few years; used cars are up 50 to 100 percent because there are no new cars to purchase; houses have doubled in price in many areas of the country as large corporate Oligopolies have been playing Monopoly, buying homes aggressively in cash deals, above list price, shutting out individual buyers, only to flip them at double what they paid. This predatory practice should be investigated and these real estate market manipulators should be prosecuted for violation of the Sherman Antitrust Act, which was passed to prohibit cartels from inhibiting fair and free commerce. The problem is, the Master Planners don't truly give a rip. The good news is, as this economic depression deepens, these Conglomerates will be getting their clocks cleaned as real estate prices dive, and will have to sell at 50 cents on the inflated dollar.
Mortgage interest rates have doubled in the last 6 months, which means the monthly mortgage payment for home purchases is now twice what they were six months ago, another blow to households looking to acquire a home. Every bill or invoice that arrives at a small business or household has risen 30 to 100 percent in the past two years, from lawn care, to the electric bill, to car insurance, cable TV, etc. Medical expenses also have exploded higher. A barrel of Oil has risen from near zero to $120 a barrel since March 2020. Gasoline has doubled. This is runaway hyperinflation.
The problem is shortages, a decline in aggregate supply. Aggregate demand is not the problem. The Federal Reserve is charged with maintaining a low inflation rate. It failed miserably, contributing to hyperinflation already occurring from shortages by additionally hyperinflating the economy with excessive printing and digital injection of dollars into the economy over the past two years, to the tune of $6.0 trillion, completely outlier.
Inflation expectations have burrowed in to the mainstream psyche. This means prices are rising now in anticipation of higher cost of goods prices expected in the future, before those prices actually rise. This is a dangerous development, a multiplier effect so to speak that increases inflation faster than it otherwise would have risen.
So, what now? The Fed does not have the tools to increase aggregate supply. Instead, it has chosen a path to destroy aggregate demand by taking actions that will be a major causal factor in a developing Bear market in stocks and Bonds, and an economic Great Recession, possible Great Depression.
The Fed has started to withdraw trillions of dollars from the economy, has started a series of significant interest rate increases, fastest in four decades. Their objective is to wipe out household wealth, wipe out small business solvency, to the point where people can no longer afford to buy goods and services, to bring down aggregate demand to the declining levels of aggregate supply.
All of this is called shrinking the economic pie. It is a similar catastrophic path that the Fed took in he early 1930s that contributed wildly to the Great Depression.
The Fed's efforts will fail to stop hyperinflation, until the American standard of living drops significantly, and affordability of goods sinks to levels not seen in generations. They will succeed in wiping out household and small business wealth. They will succeed in achieving a Great Recession, possible Depression.
At some point, this Fed's actions will inevitability become obvious, and pressure on the powers that be will say, "enough." I would not be surprised if at some point the Master Planners will realize another strategy has to take place to try and reduce hyperinflation, to try and stop economic collapse. I would expect they will try Price Controls to slow the pace of price rise, yelling "uncle," as the rise in interest rates and wealth destruction from falling markets steers the Fed to shut down their overzealous panic slowdown of aggregate demand.
But Price Controls only lead to more shortages, a disincentive to produce supply, exacerbating the key inflationary causal factor, shortages.
Until the real problem is addressed, how to increase aggregate supply, this economic crisis will not abate.
However, money can be made in this economic environment.
Our intermediate term Secondary Trend Indicator generated a Buy signal May 27th, 2022. It fell 7 points Friday (out of a possible 9 points), to negative -3. A drop below negative -5 would trigger a new Sell.
There was one change to our short-term key indicators from Friday's price action. The Blue Chip three component key indicator generated a Sell signal. The NASDAQ 100 three component key indicator also generated a Sell signal. The small cap Russell 2000's Purchasing Power Indicator generated a new Sell.
Our Blue Chip key trend-finder indicators generated a Sell signal June 9th, 2022 and remain there Friday, June 10th, 2022. The Purchasing Power Indicator component triggered a Sell signal June 9th. The 14-day Stochastic Indicator generated a Sell on June 8th, 2022, and the 30-Day Stochastic Indicator generated a Sell on June 9th, 2022. When these three indicators agree, it is a short-term (1 week to 3 months' time horizon) key trend-finder directional signal. When these three indicators are in conflict with one another, it is a Neutral (Sideways) key trend-finder indicator signal.
Demand Power Fell 16 to 490 Friday, while Supply Pressure rose 20 to 535, telling us Friday's decline was powerful with Deep Pockets Intervention supporting prices.
Today's Mining Stocks and Precious Metals Market Comments:
Our HUI key trend-finder indicators moved to Buy from a Neutral signal on June 10th.
Gold rose 22.70 Friday. Silver rose 0.11, and Mining stocks rose 12.16.
Gold is tied up in the Handle portion of its Large Long-term Cup and Handle pattern from 2012. There are typically two possible patterns for Handles. We show both of them from the textbook on page 57. Gold has chosen the more complex, time-consuming pattern. Once complete, a powerful rally will follow.
As for Gold's wave mapping, in the charts on pages 55 through 57, we show the Handle for Gold's Cup and Handle pattern has morphed into a declining Primary degree wave (2) 3-3-5 Flat pattern. It is an Intermediate degree wave A-down, B-up, C-down move. Gold is now inside the final wave C-down, which is declining in a five subwave move. Gold finds itself inside the third of five subwaves for C-down. We show a potential downside price target in the chart on page 55. Once this pattern completes, a powerful Primary degree wave (3) rally will follow.
Silver is finishing a wave 4-down corrective decline. It has further downside needed to complete the pattern. We show the chart and a projected downside price target in chart on page 58. Once it bottoms, a strong wave 5 rally will follow.
In the charts on pages 59 and 60, we show the wave mapping charts for Mining stocks. They are dropping inside corrective wave ii-down. We show a projected downside price target in the chart on page 60.
The HUI key trend-finder indicator triggered a Buy signal June 10th, 2022, as the HUI 30 Day Stochastic triggered a Buy signal June 10th, and the HUI Purchasing Power Indicator triggered a Buy on May 19th. When these two indicators agree, it is a directional signal, and when at odds with one another, it is a combination neutral signal. The HUI Demand Power / Supply Pressure Indicator triggered a Sell signal April 21st. On Friday, Demand Power rose 8 to 371 while Supply Pressure fell 3 to 386, telling us Friday's rise was strong.
DJIA/SPY PPI Fell 14 to negative - 87.45, on a Sell
DJIA 30 Day Stochastic Fast 16.67 Slow 42.67 On a Sell
DJIA 14 Day Stochastic Fast 3.33 Slow 51.11 On a Sell
DJIA % Above 30 Day Average 16.67
DJIA % Above 10 Day Average 0.00
DJIA % Above 5 Day Average 0.00
Secondary Trend Indicator Fell 7 to Negative - 3, On a Buy
Demand Power Fell 16 to 490, Supply Pressure rose 20 to 535 Sell
McClellan Oscillator fell to negative -128.72
McClellan Osc Summation Index Positive + 244.84
DJIA 10 Day Advance/Decline Indicator -338.9 on a Sell
NYSE New Highs 4 New Lows 251
Today's Technology NDX Market Comments:
The NDX Short-term key Trend-finder Indicators moved to a Sell signal Thursday, June 9th, 2022, and remain there June 10th, 2022. The NDX Purchasing Power Indicator generated a Sell on June 3rd, 2022, the NDX 14 Day Stochastic triggered a Sell on June 9th, 2022, and the 30 Day Stochastic triggered a Sell signal on June 9th, 2022. When all three component indicators are in agreement on signals, it is a consensus directional signal. When they differ, it is a sideways signal.
The NDX Demand Power / Supply Pressure Indicator moved to a Sell Signal Friday, June 10th, and remains there June 10th. On Friday, Demand Power Fell 8 to 431, while Supply Pressure Rose 11 to 450, telling us Friday's decline was strong.
The NDX 10 Day Average Advance/Decline Line Indicator triggered a Sell signal June 10th, and needs to rise above + 5.0 for a new Buy. It fell to negative - 14.0 on Friday.
NDX 100 Purchasing Power Indicator Fell 11 to 194.60 On a Sell
NDX 30 Day Stochastic Fast 16.00 Slow 50.40 On a Sell
NDX 14 Day Stochastic Fast 13.00 Slow 56.60 On a Sell
NDX 10 Day Advance/Decline Line Indicator fell to -14.0, On a Sell
NDX Demand Power Fell 8 to 431, Supply Pressure Rose 11 to 450 Sell
RUT PPI Fell 4 to + 158.39, on a Sell
RUT 10 Day Advance/Decline Line Indicator -137.20, On a Buy
McHugh's Market Forecasting and Trading Report and this Executive Summary from that report is an educational service providing a body of technical analysis that measures the possibility and probability of future changes in mass psychology (swings from pessimism to optimism and back) which identifies possible new trends in major markets within various time frames, from very short term (daily) through very long term (years and decades). The tools we use are based upon price patterns, indicators and other proprietary measures that we have identified as correlative to future market trends. While an investor or trader could come up with ideas and strategies from the information published in our reports, at no time should a reader or viewer be justified in inferring that any such advice is intended by this publication or our other services. We are not offering investing advice, but are only offering some (but not all) of the information that can be used in the investment decision making process with your own personal financial adviser. Investing carries risk of losses. Information provided by Robert D. McHugh's Market Forecasting and Trading Report is expressed in good faith, but it is not guaranteed. The market service that never makes mistakes does not exist. Long-term success trading or investing in the markets demands recognition of the fact that error and uncertainty are part of any effort to assess future probabilities. Please ask your broker or your adviser to explain all risks to you before making any trading and investing decisions. Information contained herein is believed to be reliable, but the publisher cannot be held liable for errors or omissions. No specific advice can be construed from the following. The reader is solely responsible for all actions taken. Please refer also to our disclaimer in the back of the newsletter from which this Executive Summary is derived. Copyright c 2022 Robert McHugh |
