The Curious Case of J.P. Morgan

by JC Parets  -  January 16, 2019

When it comes to stock market bellwethers, I can think of very few that are as important as J.P. Morgan Chase (NYSE: JPM).

If you look at a chart of the S&P 500 going back decades and a chart of the J.P. Morgan, they look exactly the same.

This brings me to our current dilemma. As J.P. Morgan goes, so goes the rest of the market, right?

If that’s the case, then this stock market has its work cut out for it.

JPM broke some serious support levels last month that have kept it below overhead supply, and that’s a problem for the bulls.

Here’s what’s going on:

The J.P Morgan Dilemma

First of all, here’s the short-term chart of J.P. Morgan and the S&P 500. Look how they move together:

And here’s a longer-term look, showing the rolling 52-week correlation:

So what’s the dilemma?

Well, JPM broke below last year’s lows, essentially confirming a double top.

With prices below that former support as well as a downward sloping 200-day moving average, one thing we know for sure is that this is not an uptrend:

This chart screams “re-test of the breakdown,” doesn’t it?

Here’s what it would likely look like if this is indeed just a re-test of that breakdown last month:

Is that what this is? Or is JPM going to work itself off through time instead, and stocks continue higher?

Something like this…

All this said, I think this is a 50 & 57 market, as I wrote to you Monday. And we’re watching closely and executing accordingly.

But I want to know what you think, too. Let me know at bigmarkettrends@charlesstreetresearch.com.

J.C. Parets