The S&P500 is down 2.5% year-to-date and has lost support at all the key levels- 50, 100 & 200dma. Is the global secular slowdown finally effecting the US stock market or is this simply another temporary meltdown ahead of the FOMC meeting? (Whereby the markets shoot up after the Fed postpones a rate hike.)
I think the emphasis on the Fed and interest rates is a head fake feint. current market conditions are linked to Chinese growth (or the lack thereof) not US interest rates.
Whether rates rise or not, the US Dollar is trending higher (I maintain my long position in the US $) due to continued quantitative easing (QE) from Europe, Japan and China (just to name the largest…virtually all central banks are easing and devaluing their currency).
Although the forward valuation for the S&P500 has been declining, I believe it’s still overvalued and prices need to move lower. Expect turbulence in the market until we see more mergers or outright defaults in the commodity and energy sectors. (This week’s announcement of a merger between Dow & DuPont would have been unthinkable several years ago- watch for more industry consolidation in an effort to correct global overcapacity.)
As we move into 2016, I anticipate the following:
- Gold falling below $1,000…possibly lower, as many mines are reporting costs of sub $900.
- Oil may temporarily drop below $30.
- Commodities will trend with Oil but may be approaching a bottom.
- S&P500 will test the lows of August.
The above forecast is worth every dollar you’ve paid for it (NOTE to SEC: subscription to this blog is FREE). I can’t predict the future, my investment philosophy is to identify and react to established trends…and I always reserve the right to change course.
For those that have asked, I’ve attached charts with markups and comments about correlation between Interest Rates, US Dollar, and Commodities.
Be cautious, Investor’s Business Daily has changed the market status to Market in Correction.
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