After a nice Federal Reserve boosted run, it seems this stock market has run out of steam. I wonder if it is just a coincidence that the scaling back of QE3 coincides with the market peetering out? Mid-caps stocks have broken below support levels. In 2007 they meandered around after breaking support before performing a cliff dive, losing 50% in a matter of a few months. I wonder what will happen this time.
Today’s chart presents the long-term trend of the S&P 400 (mid-cap stocks). As today’s chart illustrates, the S&P 400 has been in a strong uptrend ever since the financial crisis induced bear market ended in early 2009. In fact, the S&P 400 has gained over 240% since its financial crisis lows. During the current calendar year, however, the pace of the S&P 400 rally has slowed and has had difficulty getting far above support (upward sloping green trendline). Since the beginning of July 2014, the S&P 400 has trended lower and has just broken below support of its five year uptrend.
Gotta happen sometime. For all that the politicians, the bureaucrats, the banksters, the chittering media root-weevils, and the Keynesian academics all hate the hell out of the Austrian School economists, the Austrian model of the “business cycle” (counterfeit like sunzabeeches, thereby fostering megatons of malinvestment, and then watch the stupidity liquidate in a stinking bloody horror dissimilar only in scale from a colon full of cancer hemorrhaging the patient to death) proves itself every friggin’ time, without fail.
The laws of economics, like the laws of physics, work whether you want them to – or not.
Both the Dow and S&P 500 touched the equivalent line and bounced off at Friday’s close. Bounced off a bit more today.
You should run this chart again in two weeks. What if it has popped back above that line…what then?