Why You Need to Watch Markets Closely Right Now

I wrote about the US midterms last week. At the time the result still wasn’t known. I could only go by the pollsters.

Well, they were pretty much on the money. Results came in as expected. Democrats gained control of the House of Reps, while the Republicans held onto the Senate.

A divided Congress.

On the surface it sounds disastrous. A bad result for Wall Street.

But history says otherwise.

That’s if data from Bank of America Merrill Lynch is to be believed.

Under a Republican president the stock market has performed better when Congress was divided.

And in this instance that may work out doubly so. It may put some checks and balances on Trump’s more unruly actions. Trade wars and such.

It could be another plus for stocks right now, so we’ll see if history repeats.

It’s shaping up to be another big week in markets

The October correction brought all the opinions and sweeping statements. But rather than follow opinions, you should follow the weight of money.

Look at what the benchmark indices like the Dow Jones, the Nasdaq Composite and the S&P 500 are doing.

The recent low came in on 29 October. That low is likely to be retested, so we’ll watch if it holds.

The other date we can watch is the 7–8 November minor high from last week.

There’s a couple of reference points for you. That’ll give you a feel for where the markets are heading in the weeks ahead.

But bigger picture, while those February and April lows hold, you can’t call market collapse with any confidence.

After such a big correction, what I do know is this. It’s not the time to be taking your eyes off the market.

Yes, proceed with caution, but realise that market corrections are normal behaviour.

Stocks can and do become fully priced and sell off from time to time.

Keep in mind, the stock market is not the economy. And here’s where the US economy is right now. The unemployment rate is the lowest it’s been in nearly 50 years.

7 million job openings is around the highest levels on record. Jobs exceed the number of unemployed. There more jobs than those looking for them.

And corporate earnings? Surely any weakness would show up there. 

Well, the third quarter earnings season is not quite over yet, but here’s what we know so far.

Growth in earnings this quarter is on track to be the second highest in almost a decade. The percentage of firms beating earnings estimates this quarter is well above the five-year average. To say that corporate earnings are still solid, could be understating things.

None of that suggests imminent collapse.

So that’s why I say, now is the time to stay engaged in the market.

It can be hard to do, when all the headlines and analysts are calling a collapse. But rather than get caught up in the daily headlines, look at history and get the bigger picture.

Watch interest rates in 2019

We can get some clues where we might be at right now by looking at the history of interest rates. What it suggests is this. From the start of Fed tightening, it takes on average about three and a half years before the US goes back into a recession.

The Fed began raising rates in December 2015. So, perhaps we’re not quite there yet. But it does give you something to watch for towards the middle of 2019.

If controversial economist Phil Anderson is correct, interest rates could fall as low as 0%…but you could still turn a profit. Get your free action plan now.

You’d be watching around that that date already, if you knew the real estate cycle.

We are nearing the end of the first half of the cycle. And if history is to repeat, we could expect some sort of slowdown next year.

Note, a slowdown, not a collapse. The reason for that is clear when you understand what really drives the cycle and the economy.

People never get it, but it’s as plain as the ground you stand on. When you do get it, you’ll realise why the cycle will and must repeat. And why you can forecast what’s ahead with confidence.

The 18 Year Real Estate Cycle: Why 2018 could be the best time to buy property and take advantage of this fast climbing market. Find out more here.

So after the October correction, keep engaged in the market.

With US unemployment at 50-year lows and strong corporate earnings, it would be careless not to watch what stocks do in the weeks ahead.

Despite all the bears calling a crash, we might not be at the mid-cycle slowdown just yet.

And see how understanding this cycle is not only important for real estate. It helps in your share trading and gives you an unbelievable advantage.

Remember, everything, including the stock market, moves within the real estate cycle.

It’s the real estate cycle, which drives the economy.

And here’s the kicker, it repeats in set sequence and timeframe.

So you can know where the economy sits right now and what’s coming next.

Handy knowledge to have I can say, when it comes to your share market investments.


Terence Duffy,
Chartist, Phil Anderson’s Time Trader

Terence Duffy is an analyst and chartist, specialising in researching economic trends and cycles.  His primary focus is housing and land affordability. But you can also depend on him to offer his unique analysis of stock market charts. As Terence will show you, the charts often forecast, well in advance, the good or bad news to come — which he details in Cycles, Trends and Forecasts.

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Markets & Money