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I spend so much time with my hat held gently in hand, sitting politely, explaining why, yes, the market could just keep going higher – – that I’m going to break with that and actually share – – GASP – – why we might actually be heading lower. I know this is a violation of everything the world holds sacred, but let’s give this a shot.
First, there is the Dow Jones Composite. It has broken its trendline. Period. This isn’t a matter of interpretation or speculation. It’s simply read. The trendline broke, and when it attempted to make (yet another) lifetime high yesterday, it was repelled by the trendline, whose job is now RESISTANCE instead of SUPPORT. That’s how trendlines work.
My home of Palo Alto, California, has been in the news a lot for the past couple of weeks for reasons we needn’t explore here. I’ve written about my town many times before, including this post from three years ago in which I explained how the city had hired guards to stand alongside the train tracks in town to try to make sure students weren’t leaping in front of express locomotives to escape the pressure of being someone’s child in this town. At present, I think the city is spending about $1.5 million a year on these guards. I pass them every single day, and you’ve never seen a human more bored.
I was reminded of the subject of Palo Alto children today when I saw this on the front page of our local newspaper, the reading thereof being a rigid morning habit of mine:
All year long, the “sequence” I’ve been suggesting has been along these lines:
The world has never been so choked in debt, with the US along over $21 trillion in hocking and adding a over a trillion per year;
The bond market is in a terribly bearish formation, and bonds should fall;
Thus, interest rates will rise;
Rising interest rates will suffocate the economy;
Equities will, in turn, fall
Well, parts 1, 2, and 3 have been doing just dandy, thank you very much, but part 5 sure has been slow to wake up. Indeed, the Dow Industrials was at its highest point in the history of humanity only a few trading hours ago.
It is thus a pleasant surprise to wake up to this for a change: