Summary
Sometime not too far off, there will likely be a stock rally that will
last for a while. I doubt, however, yesterday was its beginning.
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Yesterday's rally had the CNBC crowd frothing at the mouth, extolling the
advance as the start of something "big." As you would expect, there was
congratulatory banter about the wisdom and rewards of having bought the recent dip!
The gains were indeed spiffy -- my tracking group advanced an average
2.1% (median = +1.7%) -- but based on the technical picture I now see unfolding,
I don't believe this advance will have much staying power. Based on very
rough calculations, here's what I see as the "best case" for the immediate future:
Projected Maximum
03/25 ---------------------
Close Points Price Change
------------------------------
DJIA 10,219 194 10,413 1.9%
S&P 500 1,109 22 1,131 2.0%
NAZ Comp. 1,967 43 2,010 2.2%
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I emphasize that as I see the situation right now, the above is best
case, and for all I know, "best" may not even be good enough to get entirely
through today's session.
Here's what I see setting up for the next few months. At the moment,
this "big-picture" outlook is rough and tentative and will need some tightening
up along the way. But here goes:
* New lows (lower than this week's lows), by early to
mid April.
* These new lows are then followed by a decent but
doomed rally that falls short of taking out the
respective highs that were set by the seven components
in my tracking group between late January and early
March. In other words, I am talking about something
that could turn out to look devilishly like a major
"failing rally." For the sake of argument right now,
let's say this process runs into May -- perhaps well
into May -- before it is complete.
* Then, the stock market segues into what will be a
decidedly bad June-July period.
I fully realize that the above template falls far, far outside the
current consensus view, which continues to put a lot of faith in the so-called
"Presidential election cycle." I also realize that should the above configuration
come to pass, it holds out the strong possibility that the market already has
made the highs for this year. Which, in turn, this could surely have an impact
on the November election.
Nevertheless, this is how I see the situation at the moment, but be
assured I will be carefully monitoring and updating what I have laid out here as
the coming weeks unfold.
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