Stock indices rose into the full moon, making for a third consecutive lunar inversion. Here is the updated lunar-geomagnetic model versus the SP500:
Forecast geomagnetism is fairly benign and we are now into lunar positive fortnight, however the three back-to-back inversions leave me less confident as to the direction of the stock market. Normal service may resume here (i.e. a two week uptrend) but the triple inversion maybe has some significance.
Breadth broke out, as in Advance-Declines:
This development casts doubt on a stock market topping process. However, other developments have added weight to my criteria list for a top (last post), namely treasury yields fell again, commodities indices edged up again, ECRI leading indicator growth fell further, narrow money leading indicators for the G7 have worsened, Citigroup economic surprises for the major nations have all turned into downtrends, bar China which has turned flat. Here are the CCI and CRY commodity indices:
Still tentative uptrends short of momentum, still too early to say if they are going to take off. Crude oil has flattened out but is still in a downtrend for now, whilst gold broke up beyond downsloping resistance on Thursday and held the break on Friday:
Follow through is still required though, so also tentative but more promising.
The result is I am watching the markets at the start of this week: can stocks rally and the SP500 break upwards out of its wedge on good breadth, or is another pullback going to come to pass (earnings revenues disappointing so far but the season only still getting under way); can commodities (particularly gold) rally and gain momentum; can the US dollar break beneath another support level at 79 (expectation has switched again to no QE taper in the near term)?
For a more definitive judgement on whether equities are topping cyclically we need more time, and more developments. On balance I believe we are in the early part of a topping process, pending further evidence. Next we would require a deeper correction ahead to produce a lower low, followed by a rally back to the highs whilst leading indicators fall. Rising commodities would normally play a role too, and if they are in a new uptrend, they need more time to rally some way higher. But all this could take weeks or months to fully develop.
I am also watching the sunspot count as the sun has woken up again. If the solar max is still ahead then we ought to see a sustained period of higher solar activity.