Category Archives for "Market Analysis"

Last week, one earnings report stopped the market in its tracks.

Dell Technologies posted its best single day in company history — up nearly 33% on Friday, May 29 and it continued on Monday June 1, up another 10.7%.

Quarterly revenue soared nearly 88% year over year. AI server revenue alone jumped 757% from a year earlier to $16.1 billion. The stock is now up over 200% in 2026.

Wall Street was caught flat-footed. Again.

So where does this fit in the bigger picture?

The Elliott Wave Context

In my April post I described a potential Wile E. Coyote moment — a market running on momentum ahead of economic reality. At the time, the S&P 500 was about 10% off its low, and I was watching for a rally that could extend into late April or early May.

That rally didn't just extend — it kept going.

The S&P 500 just posted its ninth consecutive weekly gain, closing May at record highs above 7,580. The Dow crossed 51,000 for the first time ever. These aren't the numbers of a bear market bounce.

From an Elliott Wave perspective, this has the look and feel of a Wave 3 — usually the most powerful and extended move in a 5-wave impulse. Wave 3s are characterized by accelerating momentum, and fundamental news that confirms what the chart was already showing. Dell's earnings report is exactly that kind of confirmation.

What's especially notable is the breadth of the move. It's no longer just Nvidia. Micron, Qualcomm, ServiceNow, Datadog, HP — the whole AI ecosystem caught a bid last week. Broadening participation is a Wave 3 signature.

The Decade Cycle Alignment

This also fits neatly with the Decade Cycle work I've done.

We are in Year 6 of the 2021–2030 decade. Historically, nine of the last ten decades saw their high occur in Years 6–10. The middle years — 4 through 6 — were positive in all ten decades studied. We are right on schedule.

The Roaring Twenties analog I wrote about last year is also worth revisiting here. In the 1920s, the big mid-decade thrust came in 1925 — Year 5 of that cycle — and launched the market into its famous blowoff into 1929. We could be entering a similar acceleration phase right now, with AI playing the role electricity and the automobile played a century ago.

The Dell quarter isn't an anomaly. It's a data point that says the infrastructure buildout is real, it's large, and it's accelerating.

What to Watch

That said, I'm not abandoning caution.

Nine straight up weeks creates conditions for a pause or short-term pullback — even in the strongest Wave 3 advances. Wave 3 doesn't go straight up forever. There will be corrections along the way, and they can feel alarming even when the larger trend is intact. 

Key levels I'm watching on the S&P 500:

• 7,517 — May 14 high
• 7,338 — first key support level, break of this level means first meaningful correction underway.

Consumer sentiment also remains a wildcard. The University of Michigan's May reading was revised down to 44.8 — lowest reading ever recorded, that doesn't match the market's exuberance. That divergence is something to monitor. Supply shocks from tariffs and the Middle East haven't fully fed through to prices yet. The Wile E. Coyote risk hasn't disappeared — it's just been deferred.

Bottom line:

Dell's quarter looks like Wave 3 fuel — the kind of fundamental confirmation that shows up when a major advance is underway, not when it's ending.

The Decade Cycle, the Elliott Wave structure, and now the earnings data are all pointing in the same direction.

The high for this decade is still ahead of us.

But so is the volatility.

The idea that the 2020s stock market could echo the 1920s stock market is a provocative one—and it’s not without basis.

Background

Post-Crisis Boom

• 1920s: Economic surge after WWI and the 1918 flu pandemic. The 1920s stock market surge didn't begin until the Depression of 1920-21 ended and the Federal Reserve lowered interest rates from 1921 until 1924.  There was also a significant tax cut implemented in the mid-1920s both for individuals and corporations.
• 2020s: Rapid rebound following COVID-19 lockdowns, stimulus-fueled recovery. The Federal Reserve cut rates to essentially zero during the Covid Crash of February - March 2020.  They also expanded their balance sheet significantly in order to inject liquidity into the economy.  After raising rates to fight the rise of inflation, the Fed cut rates three times in late 2024, with possibly more on the way in 2nd half of 2025 and beyond.

Technological Revolution

• 1920s: Mass adoption of radio, household electricity, automobiles, airplanes.
• 2020s: AI, robotics, electric vehicles, biotech, and quantum computing.

Retail Investor Surge

• 1920s: Increased public stock participation, often speculative on shoestring margins.
• 2020s: Meme stocks, commission-free trading, Reddit/Robinhood frenzy.

Loose Monetary Policy

• Both eras: Easy credit and low interest rates fueling asset bubbles.

Boom in Corporate Profits & Innovation

• Tech-led productivity and earnings boosts in both eras.

Stock Market

How does the price action in the stock market compare? 

In the first chart below I show the close only Dow Jones Industrial Average for 1921 thru 1930.  In the second chart I show the results we have so far  for 2021 thru 2030.  Both charts are on arithmetic scale.  In the chart of the 2020s I stretched the scale to get it in sync with the degree of scale range that occurred in the 1920s.  I also moved the chart over to the right to align the timeline as close as possible.

In the 1920s the low for the decade occurred in 1921 with a strong upward push in second half of 1924 and throughout most of 1925. So far in the 2020s the low occurred in 2022 with a strong upward move starting in late 2023 lasting throughout all of 2024. So after the correction in early 2025, will the market mirror 1925 and push strong higher into 2026? 

It will indeed be very interesting to see what kind of an echo of the 1920s stock market we get in the 2020s.

The Federal Reserve (Fed) cut the Federal Funds rate by 50 basis points or 0.50% on September 18. So does this mean that the economy is so weak that the stock market will sell off or is something else going on? Let's review what's happened in the last 30 years, 1994 to 2024. 

Mid-90's

The first chart below shows the S&P 500 Index (SPX) from 1993 thru 1996. The Fed raised interest rates 7 times, starting with +.25% in February 1994 and ending with +0.50% February 1995. The SPX chopped sideways during this time and then began a steady rise in 1995. 

The Fed then cut interest rates in July 1995 by 0.25% followed by two more cuts in Deember 1995 and in January 1996. The SPX kept rising into May 1996, had a small pullback in July then took off again steadily rising.

2000 to 2003 

The next rate cut cycle began in December 2000 with a -0.50% cut. This occurred nine months after the SPX peaked in March 2000. The Fed then cut rates 12 more times, with the last cut occurring in June 2003. At that point they had cut interest rates by -5.50%. Notice that the SPX hit bottom in October 2002, about 9 months before the last rate cut.

2007 to 2008

The next rate cut cycle began in September 2007 when the Fed cut rates -0.50%. The SPX peaked 3 weeks later. The Fed then cut rates 9 more times for a total of -5.50%. The last cut occurred in December 2008 and the SPX bottomed 3 months later in March 2009. 

2019 to 2020

The next rate cut cycle began in July 2019 when the Fed cut rates -0.25%. They then cut rates 2 more times before the Covid panic in March 2000. In March 2020 the Fed cut rates -1.50% in a 3 week period. The SPX bottomed during the very next week. This set off a rapid rise in the stock market because not only did the Fed cut rates but they dramatically increased their balance sheet by buying everything in sight and thereby injecting a huge supply of money into the system.

2024 to ......

And now the Fed began another rate cut cycle with the -0.50% cut on September 18, 2024. So is the market about to peak like 2007 or is this more like the mid-90's. Over at Charles Schwab, Liz Ann Sanders and Kevin Gordon published an article back in August that looks back at the 14 Fed rate cycles since 1929. Interesting article that provides additional insight. You can read it here.