| Stock Index | Commodity Index | Crude Oil | Dollar | Interest Rates | |
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| Economy | Climate |
| Stock Index |
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| Stock Index: The bull market in stocks since 2009 is still intact, but 2015 has been a stall out, if not corrective year. Some analysts state when the S&P 500 index is showing strength into December (i.e. perhaps above its 200-day moving average), then a majority of the time the market rallies well during that month. Other studies show December has never been the worst month and often one of the better performing months of a year. Analysis suggests the market should rally from a three-year business cycle low into a related top due during 2017. The business cycle model shows this will fit within a larger bull market related to the nine-year cycle bottom in 2009 and a related peak may not occur until as late as 2019. Resistance is around the current value of the index, which is shown as the thin redline from a low made in 2011. Next resistance is the record high at 2,134.72. Weekly and monthly lows are support down to 1,867.01. |
| Commodity Index |
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| Commodity Index: The ellipses shown on the chart exhibit a persistent decline in the ISM-PMI manufacturing index, which aligns with an intense downtrend in the Bloomberg Commodity Index. Although the index is oversold on a long-term basis and is overdue for a three-year business cycle low, which is still due, investors may not become excited until the index trades above 92.6283. I believe three-year and six-year business cycles are due to bottom for the economy and commodities. The strong dollar and similar bearish cycles on a global basis have caused a secondary recession that has impacted commodities and manufacturing more than the overall economy. This is due to end, but there was no evidence of a turnaround as of last month. |
| Crude Oil | Back to top |
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| Crude Oil: Oil stocks remain high, but there are forecasts for improved demand and slower pace of production in 2016. Gasoline (not shown) normally sees seasonal forward contracting demand beginning in November to January. Prices usually work higher from such a low into May, if not into the summer months. Demand for gasoline was recently shown as on the rise -in some reports. Prices are still soft, but an upturn in 2016 is the forecast relative to the three-year business cycle. Trade above $50.92 should cause a change in attitude. Ethanol production is on the rise as should be expected with fresh supplies of corn. Gasoline is likely to offer some support to oil and ethanol, but soft ethanol prices during times of aggressive production would be normal behavior. Ethanol prices are also due for a recovery during 2016. | |
| Dollar | Back to top |
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Dollar: The U.S. dollar index is overbought and due for a Level 1 cycle high ideally in December. This may relate to the Fed meeting due Dec. 15-16. At time of posting this chart the index had not violated the March high at 100.39. Traders assume a rate hike by the Fed opens the gate for additional strength in the dollar. But given that the dollar rallied a huge amount since 2014, there is chance it is overvalued in that traders have overestimated how high rates can rally in 2016. Cycle wise, the index should correct into February to March, if not for the first-half of 2016. But a new high for 2015 cannot be ruled out if the Fed raises its rates. It may take a while yet to exhaust the uptrend since October. If the Fed does not raise its rates this month, the dollar is ripe for a setback. | |
| Interest Rates | Back to top |
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| Interest Rates: The debt market appears to be less inclined to bet on a rate hike by the Fed in December, but it may be that the market realizes even if the Fed raises its rates, it is unlikely to raise in a frequent manner nor raise by a sizable amount in 2016. Business cycles continue to forecast higher rates for the 10-year Treasury note and 30-year Treasury bond, but upside potential is likely limited. Range trade remains a possibility even if there is a rate hike by the Fed. Super cycles do not suggest sustainable higher rates until next decade. I favor a rate hike and then waiting for some time for inflation and commodities to improve before additional rate increases. I think the first hike would be a greenlight that the economy is sustainable, but the Fed should then warn additional hikes may not occur for some time. But some will make a good case to leave rates alone until we see improvement in inflation. Be sure to see the Economy section. | |
| Economy | Back to top |
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| Economy: November ISM-PMI (manufacturing) was a disappointment and may be a sign the Fed will not raise its rates this month. The three-year and six-year cycle trends are still down for manufacturing, which dampens economic growth outlooks despite firm performance for the service industry sector. Note that the Economy Trend Indicator, which is a cumulative study of the PMI ticked down for the first time since 2012-13. Those years were three-year business cycle lows for several business and economic indicators. Given that the PMI ticked below 50, the U.S. economy was in contraction for the first time since 2013. Seasonally, I believe the economy slipped a bit later than normal for intra-year fluctuation and may well have bottomed last month, whereas a low in October had been favored. The forecast remains for at least a three-year cycle uptrend in economic growth and for manufacturing to last into 2017. If the coming economy rebound is of the six-year cycle variety, the economy will continue to grow until 2019. The nine-year cycle bottomed in 2009 alongside a super cycle and it is to be up into 2017 to 2019. Markit’s PMI for November showed the economy was not in contraction, but growth slowed. | |
| Climate | Back to top |
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| Climate: A six-year cycle (actually spans five to seven years) is due to be of warmer temps and lower precip during 2016-18. It is difficult to pick which year could lead to a crop problem and all three years can be of complications. The same cycle can be found in corn yield and production and it is due for a low, which casts a bias toward a crop problem. This cycle should not relate to a crop problem like that seen in 2012, which related to a 27-year climate cycle. But with the super cycles of global climate change, the six-year cycle may cause greater damage than normal. The chart shown is that of Corn Belt temps and it shows the 27-year cycle high in temps during 2012. Note the tick up this year in temps, which may be a sign the cycle has turned. | |
