Dear Dr. Dagnino,
In this cycle, I see that the stock prices peak during step 1. When will they start their decline and continue to decline?
I am confused because step 3 again shows that the lower bond yields are followed by higher stock prices.
Answer
Turning points are sequential. This is very important, although it sounds simple.
The market is weak because yields have been rising. This is event number one.
The market will continue to decline as long as yields rise. This is also an important trend. The market cannot rise without a prolonged decline in yields. Yields are still heading higher. So, let's be patient and wait for the right conditions to develop.
At some point in the future you will start seeing a decline in yields. One week. Two weeks. Something serious is happening. The market may be close to a bottom.
More on http://www.peterdag.com/.
George Dagnino, PhD
Editor, The Peter Dag Portfolio
Since 1977
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