After Thursday’s strength, one of our post-FOMC trading systems gave a sell signal and that calls for weakness over the next 3-5 days. This has a high degree of accuracy, greater than 75%. If stocks rally further on Friday, it will trigger another trend calling for lower prices with a hit rate above 85%.
If correct, this should just be a quick and relatively mild bout of weakness that can be bought for another move to new highs on the way to Dow 19,000 and then 20,000. After all, NYSE breadth the past two days has been very powerful and high yield bonds continue to rally. Leadership, while strong, has been a little schizophrenic this week, but something I am worried about at all.
I rarely mention bellwether stocks, but Federal Express caught my attention as it broke out this week. This single stock has a pretty good track record of forecasting the broad market. Unless the breakout fails somewhat immediately, we have yet another confirming sign of higher prices to come.
Get ready to hear from the doomsday crowd next about how the US dollar is doomed and China is taking over because their currency finally gets included in the SDR. It’s 100% NONSENSE from where I sit. One day, the dollar will no longer be the world’s reserve currency, but it certainly isn’t now or even by 2030!
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