Monday, December 4, 2023

INDU Update: Blast from the Past

Remember when (28 minutes ago) everyone was talking about the yield curve inversion?  I'm sure you do, but just in case you're new to the markets:  An inverted yield curve has accurately foreshadowed all 10 recessions since 1955, per the Federal Reserve Bank of San Francisco, with only one false positive in the mid-1960s.  

So, is "this time" really different?  Will this be the first outlier in ~60 years, proving all those who heeded history wrong?  

Or is the market/economy (yes, I very much realize those are two separate entities, despite the slash mark, and have written about that extensively) just biding its time?

INDU is approaching an interesting very-long-term trend line:

Here it is zoomed in:

And here's an even closer look, along with a trend line that's only months-old (in blue) instead of decades-old:

I suppose if we get into a bigger bull move, then it's entirely possible we're experiencing a "bull market in short covering."  Since most everyone who hasn't been hiding under a rock during the past year and a half knew about the yield curve inversion (along with many of the other fundamental challenges facing the market), maybe there were just too many shorts for bears to get traction.  Maybe those needed to be cleared out.  Maybe even more clearing out is necessary.  

We'll see if the market responds to this resistance, or if it blows through it.  Trade safe.

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