June 9, 2024- The Breaking Point
Andy Warhol is highly regarded in the art world for his pioneering role in the Pop Art movement, revolutionizing how art was perceived and created in the 20th century. His iconic works, such as his silk-screen prints of Campbell’s soup cans and portraits of celebrities like Marilyn Monroe, challenged traditional notions of high art by incorporating elements of mass culture and consumerism.
Warhol’s bold use of color, repetition, and commercial imagery reflected the vibrant energy of American society and transformed everyday objects into symbols of cultural significance. Beyond his artistic innovations, Warhol’s persona as a cultural provocateur and celebrity figure also contributed to his enduring legacy.
His Factory studio became a hub for creativity and experimentation, attracting a diverse array of artists, musicians, and intellectuals. Warhol’s influence on contemporary art and culture is profound, as he continues to inspire artists to explore the intersections of art, commerce, and popular culture.
The Queen
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“There is nothing new under the sun.” Ecclesiastes 1:9
“What happens today has happened before and will happen again.” Livermore
“Rather than love, money, or fame, give me the truth.” Henry David Thoreau
“Excesses in one direction will lead to an opposite excess in the other direction.” Robert Farrell
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Tracking Account Valuation January 4, 2022 – $1,206,085
Tracking Account Valuation June 7, 2024- $2,477,151 +105%
Intermediate-Term: ~ Downtrend
LOLR Trend: ~ Downtrend
Positions 39% TZA, 21% SPXU, 15% SQQQ, 14% VXX, 11% Cash
Hard stops: TZA 15.95, SPXU 29.87, SQQQ 8.93, VIX 9.93
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Noon: Intraday Stoch: O/B, FALLING
Daily LOLR STS
2/5-DT 2/5-DT 2/5-DT
Breadth: -1238/-1926
ADR: 0.38, SPY: -0.65- Neutral
NYMO: -33 Falling Intraday
NAMO: -31 Falling Intraday
NYSI is Falling
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Picture this analogy: Twenty strong individuals lift a boulder and begin to carry it up a hillside together. Along the climb, one man becomes exhausted, drops out, and then another, and yet another. As the dropouts continue, at some point, those left with the chore are insufficient to keep the boulder moving up that hillside.
That point is the “breaking point.“
We need not be told what will happen to that boulder once the breaking point has been reached.
So it is with markets. However, the individuals carrying the market higher are net advances, the number of net new highs, small caps performance, transportation issues behavior, and several additional “market internals.”
Every bull cycle has a breaking point, regardless of the persistence of capitalization-weighted averages. Diminishing participation by the rest of the market at some point decisively demonstrates markets have reached that point in this cycle.
We will explain.
What do March 24, 2000, October 11, 2007, February 19, 2020, and January 4, 2022 have in common? Each marked a breaking point in SPX, representing several of the most pivotal moments of the 21st century.
This report will meticulously compare SPX prices on these peak days to participation data from the preceding six months, including the NYSE cumulative advance-decline line, the Dow Jones Transportation Average, the Russell 2000 Average, the 10-day net new highs minus new lows for S&P 500 issues, and the 10-day average of SPX issues above their 200-day moving average.
Our studies of these historical patterns over several decades reveal that each cycle has ended nearly identically since September 3, 1929. However, with 20th-century data, we have less historical data for direct comparison. Thus, we limited this week’s analysis to the 21st century, where we’ve been able to directly compare nearly all of the same data for each period.
We identified each turning point in real-time, as each set up a clear and specific pattern that occurs only at these critical pivots. Our analysis will reveal these unique patterns and demonstrate how they signal major market shifts, providing valuable insights for future trading strategies.
However, this revelation of these unique patterns that signal significant shifts in trends goes beyond instructional purposes. We share these patterns in this week’s article because the market completed that pattern on Friday’s close! Our study of market history strongly suggests that what followed March 24, 2000, October 11, 2007, February 19, 2020, and January 4, 2022, can be expected to unfold in the weeks, months, and years following the June 7, 2024 close.
March 24, 2000:
October 11, 2007:
February 19, 2020:
January 4, 2022:
June 7, 2024:
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The data above for those peak days in 2000, 2007, 2020, and 2022 speak for themselves, as one will see upon examining the extreme divergences at each top.
In recent reports, we have highlighted the internal state of this market, emphasizing that internal data divergences have strained markets to the extreme in June. Here are some notable examples:
June 2, 2024: “On Thursday, May 23, 2024, when the SPX reached its record level at 5341.88, the McClellan Oscillator broke a divergence record set in 1937. The Oscillator, which measures market breadth, closed 114 points below its peak from 2 1/2 weeks earlier when the SPX was at 5187.67. This divergence signaled a clear warning for those paying attention. The magnitude of this divergence on a day when SPX closed at an all-time high surpasses any similar alert in the past century.”
June 4, 2024: “Despite SPX closing higher, overall market breadth ended negative today.“
June 5, 2024: “As discussed in numerous articles, bull markets end when upside momentum is exhausted, and downside momentum takes over, similar to the trajectory of a projectile. The McClellan Oscillator is a reliable indicator of upside momentum in a bull market. Once this momentum dissipates, it turns negative, leading to a downward stock trend. Market cycles peaking with SPX at all-time highs while the McClellan Oscillator falls below zero are rare. This pattern identified peaks in five past cycles: 1961, 1973, 1987, 2018, and 2020, each marking the start of prolonged bear markets. Today, SPX closed at its highest recorded level, while the McClellan Oscillator ended at -4.59.”
June 6, 2024: “Market breadth continues to lag. Eight of the last twelve NYSE sessions have shown negative overall breadth despite SPX closing at a new high on Wednesday. Net advances today were -208/-810. The McClellan Summation Index has steadily declined since May 21, as shown in the accompanying chart.”
Every bull market has a breaking point, regardless of SPX’s persistence. Historical examples include 1929 on October 4, 1973 on January 11, and 2000 on March 24. This bull market has reached that point.
We’ll review the evidence from the participation array from Friday, June 7, 2024:
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The SPX reached an all-time intraday high of 5375.08, an unprecedented level.
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The Advance-Decline Line for the NYSE closed 3000 net declines below its March 15, 2024 peak.
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The IWM (Russell 2000 ETF) closed 4% below its March 15, 2024 level and 17% below its peak of 234.29, reached on November 8, 2021.
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The DJ Transportation Index closed 7.4% below its April 28, 2024 level and 17.6% below its 2021 peak intraday high of 18246.51.
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The 10-day average of NYSE net new highs (new highs minus new lows) was 40.8, 81% below its peak of 212 on April 1, 2024.
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The 10-day average of SPX issues trading above their 200-day moving average was 70.34, 14.3% below its peak of 82.2 on April 2, 2024.
These extreme negative divergences in key market momentum indicators, as detailed on Friday’s close, June 7, 2024, are even more pronounced than those at the peak days for SPX in 2000, 2007, 2020, and 2022.
Does this guarantee that Friday’s 5375.08 peak was the final record peak for this cycle? There are no certainties in the stock market, especially concerning where extreme emotional reactions or world-changing news stories might take SPX on any given day. However, traders deal in probabilities. That Friday’s SPX peak marked the cycle’s precise top is extraordinarily high. Higher still is the likelihood that it was within 3-4% of any further minor throwover, should that occur.
In summary, the evidence strongly suggests that the market has likely peaked for this cycle, with significant negative divergences reinforcing this probability.
We will review the overnight futures at 9:15 on Monday morning.
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