The last time stock market legend Peter Eliades spoke to FOX Business host Neil Cavuto, it was during the 2022 market’s “exact bottom,” just before a two-month rally.
While the Stockmarket Cycles publisher and editor was bullish then, he said on “Cavuto: Coast to Coast” Monday that he’s returning to his cage.
“I’m returning to my cage again,” Eliades told Cavuto. “I’m going to be called a vicious and ferocious growling bear.”
While the market expert claimed he’s “100% a cycle technician” when it comes to the market, there’s one fundamental number right now that’s “really” standing out: unemployment.
U.S. hiring cooled in December to the lowest pace in two years, but the labor market remained resilient in the face of higher interest rates, scorching-hot inflation and mounting recession fears.
Employers added 223,000 jobs in December, the Labor Department said in its monthly payroll report released Friday, topping the 200,000 jobs forecast by Refinitiv economists. Still, it marks a slight deceleration from the downwardly revised gain of 256,000 in November and marks the worst month for job creation since December 2020. The unemployment rate unexpectedly fell to 3.5%, a five-decade low.
“That’s one of the lowest readings in the last oh, gosh, 60 years. You just don’t get down to 3.5% that often,” Eliades said. “Except the problem is, it works exactly the way your instinct might tell you it would work: very low unemployment numbers are usually very bearish for the market.”
From the 1970s to 1990s, Eliades noted there was never an unemployment reading like December’s recent low. But when unemployment hit just below 4% in April 2000, “that was one of the great tops in market history. The NASDAQ went down 80, 90% from there, so this a huge bear market,” he said.
A similar reading around 4% in February 1966 until 1982, Eliades pointed out, “the Dow Jones Industrial Average was on a road to nowhere. It had hit a thousand in February of ’66, and it never significantly broke that thousand until 16 years later.”
Going into 2023, Eliades predicted “another down year” for the U.S. economy, and the tipping point will be the volatility index.
“On Friday of last week, we closed at the lowest level for the VIX index all year long through 2022. And what does that indicate? Complete complacency,” the market expert said. “The market had a bad year, but we’re not going to have two bad years in a row, are we? We can’t have two down years in a row, can we?”
Eliades further advised that any time the VIX index sees this low level, “then you have invariably been at a market top in a bear market.”
“If this is still a bear market, and I’m very much a proponent of that theory,” the stock market legend said, “then we’re in trouble now with this low, very low VIX reading.”
