Since December of 2014, I have been tweeting that the Dow will orbit around an attractor level around 17,300…
“Dow is in what I see as stable part of weightless orbit around 17,200… waiting for Fed communications”
— Edward Lambert (@wisegrowth) December 17, 2014
“Dow heading toward attractor zone of 17,200 to 17,300 that I have been seeing… “
— Edward Lambert (@wisegrowth) January 14, 2015
Here is what the Dow has done since then until just a moment ago…
The red line shows the attractor level that I have been seeing. Why did I see this? The economy hit the effective demand limit in the 3rd quarter of 2014. I knew the market could not go much above that level due to a profit limit. I sensed that the economy would slide along the effective demand limit. I sensed that the economy would at least hold onto that level. And I knew that monetary policy would stay accommodative. I knew there would be a correction at some point, but that the market would rise back to the attractor.
When the Dow was around 16,700 on September 17th, I tweeted…
“Now we will see if the Dow goes up to my 17,300 level of attractor state…”
— Edward Lambert (@wisegrowth) September 17, 2015
A month later…
“The Dow has finally topped the 17,300 level that I see as its attractor level. It can rise above this level but not too far. Dow now 17,365”
— Edward Lambert (@wisegrowth) October 22, 2015
With the Fed signalling a rate rise in December. I am now re-assessing the attractor level. The important factor is how consistent the Fed will be over time lifting the Fed rate.