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This presentation is solely for informational purposes and not a solicitation to invest. Stonehenge Analytics offers and publishes forecasts of future likely price movements of various financial assets. These are opinions formulated from our cycles-based historical analytical research. They are not, nor are they represented to be investment advice. Individuals or institutions choosing to act on these opinions are doing so at their own risk. Stonehenge Analytics does not warrant or guarantee that acting upon its published opinions will produce financial gain. Past historical performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. Individuals and institutions should consult a financial advisory professional before making any investment.Druitt’s Weekly Data ChartsWeek Ending December 13, 2019 All four major U.S. stock indices closely tracked each week by the Weekly Data Charts newsletter produced modest weekly price rises this past week. Three of them, the Dow Industrial Average, the S&P 500 Index and the NASDAQ Composite Index, ended the week at new all-time weekly-close price highs. For the S&P and the NASDAQ their Friday closing prices were also new all-time daily-close price highs. However, the Dow Industrial Average was unable to post a higher daily-close price during this past week than its November 27 closing price at 28,164, which remains its all-time daily-close price high. Though the Dow Transports Average did produce a weekly price rise it remained far below both its current 52-week daily-close high from November 7 at 11,091 and its all-time daily-close high from September 14, 2018 at 11,570. The Transports Average closed on Friday at 10,775, thus continuing its failure to provide a “Dow Theory” confirmation of the intermediate-term rising price trend of the Dow Industrial Average. For the week the Dow Industrial Average rose by +120 points (+0.43%) to close on Friday at 28,135. This was a new all-time weekly-close price high, edging out its previous weekly-close high from Friday, November 29 at 28,051. The Dow Transports Average rose by +67 points (+0.63%) to close at 10,775. The broadest-based S&P 500 Index posted a weekly gain of +22.89 points (+0.73%) to close at 3,168.80. The technology stock-heavy NASDAQ Composite Index posted the largest weekly percentage rise of the four indices, moving up by +78.35 points (+0.91%) to close at 8,734.88. As previously noted, the Friday closing prices of the S&P and NASDAQ were new all-tine daily and weekly-close price highs. The price momentum data from the NYSE and many ratios and moving averages of that data constructed and tracked by the Weekly Data Charts newsletter produced weekly movements this past week which were overwhelmingly bullish for the future price directions of the major stock indices. Most bullish was the fact that moving averages of NYSE weekly new 52-week lows fell across all 5-week through 40-week moving average time periods. For the 10-week and 40-week moving averages these were simultaneously made changes of direction to falling from rising, ending bearish rising trends that had been in place for four weeks for the 10-week average and for eight weeks for the 40-week average. Moving averages of weekly new 52-week highs rose at the 10-week, 30-week and 40-week time periods, but fell at the 5-week and 20-week time periods. Moving averages of NYSE weekly new high/new low ratios rose across all 5-week through 40-week time periods. For the 5-week, 20-week and 40-week moving averages these were changes of direction to rising from falling. Moving averages of NYSE weekly “percent of stocks rising” ratios derived from NYSE weekly advance/decline statistics also turned in weekly movements that were bullish for the major price indices across all 5-week through 40-week moving average time periods. For the shortest-term 5-week moving average this week’s rise was a change of direction that ended a four-week decline and made its December 6 level at 52.54% a weekly-close low inflection point. It ended this past Friday at 54.66%. Yield Spread data from the U.S. bond market again produced conflicting weekly results. The “Merrill Lynch Confidence Index” produced a very strong and bullish rise to 72.07 from 67.77 last week. This strong rise was produced because the A-Rated Bond Index yield rose by +6 basis points to 2.71% while the BB-Rated Bond Index yield fell by -15 basis points to 3.76%. This was the third consecutive weekly yield decline by the BB-rated yield. The “Confidence Index” surpassed its most recently-made short-term high from September 13 at 71.98. The Corporate Bond/Treasury Bond Yield Spread however produced a bearish rise to +88 basis points from +79 one week ago. This reversal of direction to rising from falling sets the December 6 level at +79 basis points as an important technical support point and the lowest point for the Yield Spread since March 9, 2018 when it was then rising from its multi-decade low at +70 basis points made on February 2, 2018. This week’s Yield Spread rise was produced by the 10-year Treasury note yield remaining virtually unchanged from December 6 at 1.83% versus 1.84% while the Barron’s High-Grade Corporate Bond Index yield rose by +8 basis points to 2.71% from 2.63%. We should point out that it is highly unusual for the BB-Rated Bond Index Yield to fall by -15 basis points in the same week that the A-Rated Bond Index yield and the Barron’s High-Grade Index yield both rise and that we should not expect to see this phenomenon repeated. Our long-term chart of the S&P 500 Index that uses only its weekly-close prices is also a comparison of that index with the short intermediate-term 10-week moving average of NYSE weekly new 52-week lows. The 10-week moving average of weekly new lows is multiplied by a factor of four on the chart below for scaling purposes. But, values shown for specific dates noted are actual, unscaled values. On the S&P 500 portion of the chart we want to once again point out that the S&P still has not successfully crossed back above the dashed white broken “Trump Rally” up-trend line of successively rising November 4, 2016 and March 23, 2018 intermediate-term weekly-close price lows that it shattered to the downside in last year’s major intermediate-term price correction that lasted from September 21 through December 21, 2018. On the 10-week moving average portion of the chart we wish to observe that this major price correction was preceded by a rising dashed yellow trend line of successively higher short-term lows made by the 10-week moving average of NYSE weekly new 52-week lows which began all the way back on February 24, 2017, nineteen months in advance of the S&P 500 then all-time weekly-close high at 2,929 made on September 21, 2018 that immediately preceded the major -17.5% price correction that ended on December 21, 2018. Anyone who was foolish enough in to believe in 2017 and especially in September 2018 that the S&P 500 could continue rising in price simultaneously with the NYSE weekly “New Low” list expanding, albeit slowly, without limitation deserved the outcome they eventually got. We also wish to point out on the S&P portion if the chart that it has recently established a solid white up-trend line of rising May 31 and August 23, 2019 weekly-close price lows that is exactly parallel to the dashed white broken “Trump Rally” up-trend line that has served so consistently as its top up-trend channel line since December 21, 2018. This potential lower trend channel line is currently at approximately the 2,950 to 3,000 price range. It is the Weekly Data Charts opinion that this recently-formed line of rising lows is the maximum downside price target for any “pullback” which the S&P might undertake over the near term of the next 3 to 5 months. On the 10-week moving average portion of the chart we will observe that it has recently established a new line of rising intermediate-term March 15 and November 8, 2019 lows at 45.1 and 97.9 new lows that is exactly parallel to its dashed and now-broken line of February 24, 2017 through September 7, 2018 rising lows that precipitated the major price collapse of September 21 through December 21, 2018. The 10-week moving average ended this past week at 108.8 new lows and right on this nascent intermediate-term up-trend line. In 2017-18 the first significant S&P 500 “pullback” did not commence until January 26, 2018 and 11 months after the 10-week moving average up-trend line began on February 24, 2017. If the 10-wek moving average continues to extend its new parallel up-trend line and at a comparable pace to its 2017 extension then we can expect that the S&P 500 will commence its first significant “pullback” on or about February 15, 2020 and 11 months after its March 15, 2019 initiation. Between mid-February and mid-May, 2020 would be the time frame during which we should expect an S&P 500 “pullback” to the up-trend line of rising May 31 and August 23,2019 lows. If the 2018 experience is more or less repeated, then we can expect that the S&P will commence another rally phase after this “pullback” is completed during which the rising trend of the 10-weekmoving average of NYSE weekly new 52-week lows fails to be broken to the downside, but is instead extended further as was the case from January 26 through September 7, 2018. In 2018 this subsequent rally concluded on September 21, 2018 and 19 months forward of the initiation date of the 10-week moving average up-trend line. If that time schedule is again followed then we should expect that the S&P 500 will post a second and higher price high on or about mid-October, 2020 from which it will collapse similarly to its September 21 to December 21, 2018 price collapse. Lastly, we wish to call attention to the red horizontal line placed at the 250 new lows mark. The signals in August 2011, October 2017, July 2015 January 2016 and October 2018 that the S&P 500 was commencing either a significant “pullback” of more than -9.0% or a full-fledged intermediate-term major correction of from -12.6% to -17.5% was the crossing by the 10-week moving average of weekly new lows above the 250 new lows mark. The 10-week moving average is a long way away from that level today. Moreover, it cannot reach that level unless the NYSE begins to regularly produce at least 250 weekly new 52-week lows each week. The most recent time period that the NYSE produced multiple consecutive weeks of 250 weekly new lows and more was from Monday, July 29 through Friday, August 30. During this time period the S&P 500 “pulled back” from its July 26 weekly-close price high at 3,025 to its subsequent August 23 weekly-close price low at 2,847 for a decline percentage of -5.9%. The 10-week moving average topped out on September 6, 2019 at 221.6 new lows, failing to cross above the 250 new lows line. But, we will observe that if the 10-week moving average continues to extend its up-trend line since March 15, 2019 then its next upward thrust will stand a very good chance of producing a peak high that will be at or above this important technical mark. Our next chart compares the S&P 500 Index with the “Merrill Lynch BB-Rated Bond Index Yield” using weekly-close data since January 5, 2007. The BB-Rated Bond Index Yield is multiplied by a factor of 10 on the chart for scaling purposes. Yields shown for specific dates noted are actual, unscaled yields. This chart shows the very long and very consistent inverse relationship between major intermediate-term yield highs made by the BB-Rated Bond Index Yield and major intermediate-term price lows made by the S&P 500 Index. The most recent of these inverse correlations was made on December 21 and 28, 2018. We can also easily see that when the BB-Rated Bond Index Yield has consistently trended downward the S&P 500 Index has consistently trended upward in price. It is therefore important for all stock-focused investors to take mote that the BB-Rated Bond Index Yield has fallen to its lowest level over the entire chart history as of this past Friday at 3.76%, taking out its previous low from September 29 at 3.83%. This week’s decline to a new and lower yield low has moreover extended the lower down-trend channel line of the long-term yield down-trend that has been in place since at least May 10, 2013. The top line of this down-trend channel that is formed by successively lower intermediate-term yield highs made on October 7, 2011, February 12, 2016 and December 28, 2018 is up at approximately the 6.0% yield level. Moreover, for the BB-Rated Bond Yield to rise to the top channel line it must first rise up through and above the horizontal technical resistance line we have drawn from its May 24, 2019 short-term high at 4.84% which it made coincident with the S&P 500 short-term “pullback” price low it posted on May 31 at 2,752. Needless to say, it is nowhere close to doing that and is currently not even moving in the correct direction to achieve such an objective. What the chart below tells us is that as far as the high-yield “junk” bond market is concerned all systems are “GO” for extending and continuing the long-term “bull market” up-trend for the S&P 500 that has been in place since March 2009. No major intermediate-term S&P price correction that might bring its price back down to the up-trend line of rising March 6, 2009, October 7, 2011, February 12, 2016 and December 21, 2018 is anywhere in sight. Longer-term investment-oriented accounts can safely and confidently ignore alarmist forecasts from all quarters, and particularly from President Donald J. Trump, that dire consequences will befall their stock market investments under this or that forward scenario. The global financial fundamentals that are powering financial asset prices upward are currently so powerful that it is difficult to see what imagined catastrophe, including the possible election of a Democrat as president of the U.S., might de-rail this 10-year bull market. Our final chart this week will lend some more evidentiary weight to our contention that another major intermediate-term stock market correction is still many months away from becoming a potential threat to long-term stock investment portfolios. The chart below compares long-term 60-week moving averages of NYSE weekly new 52-week highs and weekly new 52-week lows using weekly-close data since May 29, 2009. These two moving averages executed an important technical crossing in the first week of December. The 60-week moving average of weekly new 52-week highs finally managed to rise through and above the falling 60-week moving average of weekly new lows when it rose to 267 new highs and the 60-week moving average of weekly new 52-week lows fell to 253 new lows. Arrows on the chart point to the only such “bullish crossings” made by these two antithetical moving averages in the past 10-plus years. The previous “bullish crossing” on September 30, 2016 took place a full 16 months in advance of the commencement by the S&P 500 Index of its next significantly damaging downward price movement which commenced on January 26, 2018 and after the second of its “twin highs” made on June 23, 2017 and January 26, 2018. Even if a significantly damaging price decline had commenced after the first of the “twin highs” was made on June 23, 2017 that was 9 months after the bullish crossing was made. At the current time we will mostly concern ourselves with the future path of the 60-week moving average of weekly new 52-week lows. That is because we can forecast with an exceptionally high degree of accuracy when this moving average will finally bottom out and cease falling. The earliest that the 60-week moving average of weekly new 52- week lows will cease the decline it started from its December 28, 2018 peak high at 334 new lows will be on Friday, February 28, 2020. That will be the last week that the gargantuan weekly decline figures from last year’s major correction will drop and be “replaced” in the 60-week moving average calculation. There is simply an infinitesimally small chance that the NYSE might generate larger weekly figures of new 52-week lows than it generated from October 18 through December 28, 2018 which are due to drop and be “replaced”. In 2017-18 the time lag between the 60-week moving average final low made on April 21, 2017 and the commencement of the next significantly damaging price decline on January 26, 2018 was 9 months. If this approximate time lag is followed again then the next major price correction by the S&P 500 will not commence prior to late November of 2020. This predicted start date is not much different from that forecast by our earlier examination and analysis of the 10-week moving average of NYSE weekly new 52-week lows. When the Weekly Data Charts newsletter starts to get very similar forward forecasts from multiple data series over multiple moving average time periods we start to believe that there just might be some credence to them. What we are highly confident about is that long-term investment-oriented accounts have very little reason today to put any credence into alarmist forecasts coming from various and sundry quarters warning of imminent dire consequences for the U.S. stock market. There is currently nothing that we see on all of our many radar screens which looks remotely close to the forerunner of an imminent serious reversal in the price trend direction of the major stock indices. Relatively short-term “pullbacks” will come and go. But a major, sustained, multi-month price collapse like that which occurred from September 21 through December 21, 2018 is nowhere in sight. This week’s chart package presents evidence from NYSE price momentum data and from the Merrill Lynch BB-Rated “Junk” Bond Index Yield which strongly argue that the commencement of any seriously damaging downward price movement by the major U.S. stock indices is many months out into the future. Over the near term of the next 3 to 5 months there can and will be short-term “pullbacks”. But, the commencement of a highly damaging, multi-month correction like that which lowered the S&P 500 by -17.5% from September 21 through December 21, 2018 is most likely no closer in time than October-November 2020 based upon forward “replacement” analysis of multiple moving averages of NYSE weekly new 52-week lows. Longer-term investment-oriented accounts can confidently ignore alarmist, dire warnings of imminent price collapse commencing sooner in time than that.Thomas J. DruittFinancial Markets Research and AnalysisStonehenge Analytics ................
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