Back in April, I wrote that the Dow Jones would rise to 16,800 and then revolve around that point and then eventually come down from there.
“My view now is that the Dow Jones will make a publicity effort with hopes to get back up to 16800, then come down from there.” (link)
I first mentioned it here on Angry Bear on June 10.
“I have seen the top of the Dow Jones index as 16,800, but when the ECB loosened monetary policy to an extent never before seen last week, the Dow Jones lofted over 16,800. It is now hovering below 17,000, but there are concerns that it should not loft higher.” (link)
The extra accommodative monetary policy from the ECB and the Fed have lifted the Dow above 17,000. But today the Dow is back close to 16,800 again. As I write, it is at 16,811. There are concerns over earnings & profits, which we already know are vulnerable. (link to yesterday’s post)
I see that the end of the business cycle is trying to make itself known, but there are optimisms and expectations trying to push beyond the natural end. The economy is hitting its effective demand limit. The reality of the market will make itself known as data comes out over the next 6 months.
We have seen this coming since last year according to the calculations I am developing for effective demand. The global economy is hitting the effective limit all over the place, Europe, China, Japan and the US. The effective demand limit that I now see for the US is a real GDP around $16.250 trillion.
Note: Remember that this plateauing of the stock indexes will mean that capital income will cut back its consumption.