Slope of Hope Blog Posts

Slope initially began as a blog, so this is where most of the website’s content resides. Here we have tens of thousands of posts dating back over a decade. These are listed in reverse chronological order. Click on any category icon below to see posts tagged with that particular subject, or click on a word in the category cloud on the right side of the screen for more specific choices.

So What Happened on Friday?

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US stock markets fell hard on Friday after President Trump reacted to new export restrictions on rare earth metals from China with a threat to add a further 100% tariff on imports from China in addition to the 57% tariff currently in force. Trump walked back that threat over the weekend and at the time of writing futures have rallied about 50% of the decline from Friday’s lows before pulling back somewhat.

So what is the rare earths issue about? Well for those who don’t already know, rare earths are vital for a lot of manufacturing of complex machinery such as cars, jet engines, nuclear reactors & LEDs, are also important in oil refining, and are vital for a lot of high tech manufacturing such as computer components, smartphones, high performance batteries etc. There is a good page about rare earths on wikipedia here which is worth a read.

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New Highs All Round

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In my post on Friday 26th September I was putting the case that the modest retracement that we saw that week might well be over, and in my post on Monday 29th September I was outlining the still possible option that we might nonetheless see another leg down on US indices, though I was assigning that a low probability.

Equity indices resolved higher as expected, and we have seen new all time highs made last week on SPX, QQQ, DIA and IWM. My personal view is still that US equity indices are likely heading higher into the end of the year unless we start seeing strong breaks of the support at the daily middle bands that were backtested and held on SPX, DIA and IWM in the late September lows.

How will that be affected by the current government shutdown? Well that rather depends on how long it lasts, and the longer that lasts the more likely it is that we see equity markets weaken. Looking at the chart below there is a significant negative lean historically for these though I’d note that of the twenty government shutdowns listed on the chart below, the last five starting in Nov’ ‘95 all closed green, with a real outlier in the last one in December ‘18 which was the most bullish shutdown since 1976.

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We Could Still See Another Leg Down

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In my post on Monday September 15th and my post on Friday 19th September I was looking in detail at the historical stats suggesting that after Tuesday 16th September last week there was a short bearish window into the end of September, and looking at the limited pattern support for a modest retracement then.

In my last post on Friday 26th September I was looking at the backtests of the daily middle bands on SPX, DIA and IWM and saying that the minimum targets for a modest retracement had been met. The bearish window still runs into the close tomorrow, as the last day of September and the third quarter, but equity indices might well run directly back into new highs.

Today I would like to look at the possibility that we might still see another leg down into the end of the month as there are possible pattern setups and targets for that.

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This Bearish Window Is Closing

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In my post on the morning of September 3rd, just after the sharp decline on the first trading day of this month, I was noting buy signals on all six of the hourly equity index futures charts that I follow, and those all delivered over the remainder of that week. When four or more of these fix at once on the hourly futures they generally deliver.

In my the Bigger Picture video on Sunday 7th September I was noting the strongly bullish leaning historical stats for the coming week and was suggesting a target for QQQ at a retest of the August all time high at 583.32, and we saw that with a new all time high at 587.86, seeing also new all time highs on SPX and DIA, and IWM moving closer to the IHS target at a retest of the Nov 2024 all time high at 243.04.

In my post on Monday September 15th and my last post a week ago I was looking in detail at the historical stats suggesting that after Tuesday last week there was a short bearish window into the end of September, and looking at the limited pattern support for a modest retracement

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Decision Time on the US Dollar

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In my last post on the US Dollar on 26th June I was looking at the very big inflection point forming here on USD that will likely ultimately resolve into a rally back into a retest of the 2022 high at 114.78, or a break down towards the 78-9 area.

Since my last post, on the monthly chart below, USD delivered a small move down to test the rising megaphone support from the 2011 low, rallied and then retested the low, slightly breaking that rising megaphone support.

What would that generally mean? Well the slight break of the rising megaphone support means that my working assumption is now that USD is in an topping process for the move up from the 2011 low, so I am looking for a topping pattern to form, and the retested low has set up a shorter term double bottom that may now deliver a strong rally.

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