Investments

‘Inflating Parabolic Bubble’ Formations Remain A Warning for The Stock Market

The Dow Jones Industrial Average, S&P 500 and Nasdaq Composite set new all-time intraday highs on Friday the 13th at 28,290.73, 3,182.68 and 8,768.87, respectively.

What Defines An Inflating Parabolic Bubble

My measure of momentum is called the 12x3x3 weekly slow stochastic, which scales between 00.00 and 100.00. Readings above 80.00 are overbought. Below 20.00 is oversold. An indication that a rally has moved too far, too fast is a reading above 90.00, which I call an inflating parabolic bubble. The Dow, S&P and Nasdaq have readings of 92.84, 95.15 and 93.89. When these levels were seen in the past the averages eventually declined by 20% to 60%. A problem for investors is that the declines wipe out gains faster than they were achieved.

The Dow (28,135.38 on December 13) is below quarterly and weekly risky levels at 28,537 and 28,831. Monthly, quarterly and annual value levels remain at 27,703, 27,266 and 15,819 until year end.

The S&P (3,168.80 on December 13) is below its weekly risky level at 3,244.4. Its monthly pivot is 3,130.7 with quarterly, semiannual and annual value levels at 3,076.9, 2,955.6, 2,867.1, respectively, until the end of the year.

The Nasdaq (8,734.79 on December 13) is below its weekly risky level at 9,012. Its quarterly and monthly pivots at 8,591 and 8,563 with semiannual and annual value levels at 7,999 and 7,370 until the end of the year.

The Dow Transportation Average (10,775.76 on December 13) is below its quarterly and annual pivots at 10,864 and 10,976 with its weekly risky level at 11,155. Semiannual and monthly pivots are 10,720 and 10,582. Each of these levels expire at the end of 2019. Its 12x3x3 weekly slow stochastic reading continues to decline.

The Russell 2000 (1,637.97 on December 13) is below its weekly risky level at 1,679.29. Quarterly, annual, monthly and semiannual pivots are 1,599.40, 1,590.63, 1,577.49 and 1.572.85, respectively, which expire at the end of the year. The 12x3x3 weekly slow stochastic reading ended last week at 90.00 so it to will be an “inflating parabolic bubble” this week.

Here’s Last Week’s Scorecard

‘Inflating Parabolic Bubble’ Formations Remain A Warning for The Stock Market

Scorecard For Global Equity Averages

Global Market Consultants

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