This is a good shorting spot.
27,000 is a good line on the Dow (/YM), which was around 18,000 from November 2014 through November 2016 so we can call that a good consolidation point. So we’re 50% above 18,000 and that means, via our fabulous 5% Rule™, that we can expect a 20% (weak) retrace of that 9,000-point run, back to 25,200 or a 40% (strong) retrace back to 23,400 and, guess what? That happened already!
In fact, we fell yet another 1,800 point to 21,600 just recently but it was an overshoot and we quickly took back the strong retrace and the weak retrace and now we’re back at 27,000 but the real question is – where should we be?
Let’s consider that 18,000 was a realistic base. The economy was going well under Obama, America was at full employment and a respected World leader and the deficit was getting under control – all good things that help a market stay strong. The Dollar was strong too, it was at 102 in 2017 and Americans enjoyed great buying power and my kids loved going to the Dollar store to get knick knacks.
Trump took office in January of 2017 and he cut taxes drastically for Corporations and people in the Top 1% and the Dollar dove all the way to 0.88 a year later, a 14% collapse that we’ve only recovered half of 2.5 years later. Losing 7% of the buying power on every penny you’ve saved your entire life is a devastating shock to the average American, who was not able to offset the loss of buying power through their stock market gains.
Still the weak Dollar is also good for our Corporate Citizens (thanks Citizens United!) as well as for the Top 1%, whose stock prices were jacked up by the weak dollar which, of course, makes our exports cheaper too. This is how we make America Great, by devaluing our currency, running up the deficit and putting profits over people time and time again. Surely that’s worth a 20% boost in the Dow, isn’t it?
But now we should consider that 50% is MORE than 20% (math done as a courtesy for Fox viewers) so how exactly are we getting that extra 30%. …