BKX and INDU: Objects in Mirror May Be Closer Than They Appear

The market took a dive yesterday, after shocking comments by Minneapolis Fed Bank President Neel Kashkari, in which he finally publicly apologized for the fact that his parents apparently had no idea how to spell "Neil."  He also mentioned that while he originally had two rate cuts "penciled in" for 2024, he just realized that he actually has a doctor's appointment on that exact same day, so he might be forced to reschedule those rate cuts for 2025.  Or beyond, if bulls won't stop leaving annoying messages on his voicemail.  

Of course, the market has been banking on a return to "nOrMaLCy!!!!" which, to the market, apparently means ridiculously low interest rates and the printing presses spewing endless free money.  The market, of course, ignores the fact that the environment of the prior ~15 years was anything but "normal" and that rates were instead insanely low for insanely long, and QE Infinity is unsustainable.

As I wrote a while ago, though, this market has been suffering from an extreme case of "irrational exuberance," so Kashkari's comments serve as yet another potential wake-up call.  Thing is, wake-up calls have been ringing out all over for a while, but the market hasn't cared -- so we'll see if the "irrational exuberance" psychology finally starts to shift a bit, or if the market goes back to fueling itself primarily on the sweet sweat of its own drunken euphoria.

My guess is that when the market finally wakes up for real, it's going to get ugly beyond belief.

But we may not be quite there yet, and another high, even if we correct further in the near-term, is not out of the question.  Let's look at two long-term charts for clues, starting with BKX:

BKX is probably the most potentially bearish chart going right now in the big picture, though here again, another high is not out of the question as (C)/(3) could still be unfolding.  Without even labeling it, we can see that the decline from the most recent high is only three waves down so far.  If it becomes impulsive, then bears might be coming out of hibernation.

INDU is interesting as well, though here again, it's unclear if (iii) -- if that's what this is -- is complete. 

In conclusion, while bears don't have a lot to sink their teeth into yet, since there's not been an impulsive turn, there are ongoing hints that we're not in "a new paradigm" and stocks have not "reached a permanently high plateau."  We'll keep watching to see if there's already a turn underway, or if bulls can manage another high before the cliff starts to crumble.  Trade safe.