Let’s look at what’s going on in the markets…
10-year Treasury bonds have seen the clearest trend of all the market, as we have been forecasting. They’ve gone right to the top of the T-Bond Channel, at 2.95% recently.
The question now is: Will bonds break above that channel, given stronger inflation and potential growth trends?
Higher yields will hurt stocks and real estate at some point, but a peak here and lower yields to follow would suggest that the great 4% Trump economy is not manifesting after all. That’s also bearish for stocks.
A break up in bonds would likely allow stocks to rally a bit further due to higher growth expectations.
The dollar keeps trying to bottom around 88 and the euro has resistance around 125, so a reversal is likely here, it’s just a matter of when it gets momentum.
Gold broke through a key down trend-line through the tops since the peak in September 2011. But it has been slow to follow through, and a rising dollar would be a headwind.
Gold still looks bullish for now, with resistance just above here, at $1,378. If it breaks above there, then $1,428 to $1,440 is as high as I’d expect it to go. That would be the last opportunity to sell gold and silver.
Stocks have been in a clear parabolic wedge or channel since early 2016. This has been true for the Nasdaq, the S&P 500, and the Dow. The Nasdaq has been the strongest of the lot. The small-cap Russell 2000, abnormally so at this late stage, has been trading nearly as strong due to less exposure to tariffs and international trade.
We very briefly broke the bottom of those wedges and channels on February 9, but reversed strongly. The markets are testing the top and bottom ends of this channel.
In retrospect, I have redrawn the Dow wedge as a channel and the two scenarios are shown in the chart below.
A clear break below 23,750 on the Dow would signal we’re in scenario #1 and that could play out near term.
If we can hold above that level, then markets are likely to move sideways and go as high as 28,000 or even 30,000 by July. That would very likely be the final peak of this classic blow-off parabolic rally.
It would take a break to new highs above 26,700 on the Dow to signal scenario #2 and that break upwards. We’re presently much closer to that than the downside break point.