Market Timing Brief for the 3-27-2015 Close: Lower U.S. Rates is the Best Bet Around

A Market Timing Report based on the 3-27-2015 Close, published Sunday March 29nd, 2015

I keep my comments reasonably brief to honor both my time and yours.  The rest is on Twitter®/StockTwits®.

Let’s see how I did with…

MY CONCLUSIONS FROM LAST WEEK

PREDICTION for U.S. stocks: “Next stop for the SPX?  We will likely match the prior high, but I’m guessing we’ll get to a new high [meaning go even higher].  Earnings are due to fall this quarter, so there could be bumps along the way, but as long as the Fed is out of the way, rates are under control, and growth continues, albeit at a slower pace, stocks will do OK.”

We got the bump DOWN rather than a further rally.  But my Bullish outlook was wrong short term.  On the positive side, we have a higher low to work with IF it holds up.  I say stay long and over the term of say, a few weeks, you’ll still be ahead.  Individual stocks could be another thing as those guiding down on future earnings will be hit badly.  Stick with indices unless you know your companies’ earnings are a lock.

If you have not yet read my market scenario for the next few months, it’s a must read here:

The Scenario That Will Unfold

Continuing with the recap of last week’s predictions…

PREDICTION: “Small caps suggest a bounce, while large caps are lagging, still below the prior breakout.”

Small caps remain ahead.  I predict that big and small stocks will now rally into earnings that begin with Alcoa (AA) on April 8th.  If some earnings and guidance comes in under expectations, market shocks will occur with some retracement of the indices.  A rally is not a given, but I would say you could add some SPY here if you are underexposed to large cap stocks.  Save some powder to add more lower if the markets tumble on earnings.  Due to the higher volatility with small caps, I would not buy those here unless you apply stops carefully.

PREDICTION: “Rates will head still lower.  That will keep gold from breaking support, but the U.S. dollar must keep falling from here to have gold rally in a much more substantial way. “

1. Rates? Wrong short term.  Rates DID initially break below 19.30 but then rallied above it.  I believe this week rates could break through that 19.30 level on the 10 Year Treasury Note (Treasuries will rally; higher TLT).

2. Gold?  My prediction is/was that gold will not be a big loser and could bob up and down depending on the forces for or against it.  In other words, I’m not a big fan of gold except as insurance at the moment.  The rally held up, but eased on Friday.  GDX is doing worse, and we were out near the top.  I say the dollar will rise this week, and gold will fall (GLD).

3. U.S. Dollar?  On that I was right.  It went down.  It now appears set up to rally after a correction.  Truthfully, all we know is that we are at a pivot point.  Trade the next move UP or down.  But I’ll go on record that I’m betting on DOLLAR UP for this week (UUP).

And now for the charts for the week:

SP500 Index (SPX, SPY; click the chart to enlarge it):

Note that we are both below the Dec. high and below the lower yellow channel line.  The latter is a BROKEN wedge that leads back to the October low, which is my outside Bearish scenario (see below).  We need to recover quickly above that lower yellow trend line on the daily chart.

sp500-index-market-timing-chart-2015-03-27-close-daily

SPX eases a bit.

To find out what I’m doing, including buys and sells, please follow me here: Follow Me on Twitter®.   Follow Me on StockTwits®   You don’t have to make comments yourself to read my messages.

My greater concern is over the intermediate term (weekly) chart:

Follow the pink line up from the October low in the chart above from 2011.  Note that the pink weekly trend line was violated to the downside in October.  There was a recovery above it into the end of 2014, but in 2015, we’ve never gotten above it (look 2 charts down for higher magnification of this).  Before that, we had gone about TWO years without violating that line, so things have changed.

sp500-index-market-timing-chart-2015-03-27-close-weekly

SP500 Index losing steam on weekly chart.

We are now back below the end of December 2014 high as shown in the chart below. 

sp500-index-market-timing-chart-2015-03-27-close-daily-2

SP500 Index lost momentum since 12-2014.

All of this means that we must rally quickly or we risk revisiting the December or Jan-Feb. lows.  If things get much sloppier during earnings season, we could hit the October low again, but I’m not betting on that.  If earnings are not that bad, we’ll stay above the Dec. low.

Russell 2000 U.S. Small Cap Chart (RUT, IWM; click the chart to enlarge it):

rut-small-cap-russell-2000-index-market-timing-chart-2015-03-27-close

Small caps still resilient vs. large based on greater exposure of large caps to dollar strength.

The Gold ETF Chart (GLD; click to enlarge the chart): (see above and below for predictions)

gld-gold-etf-market-timing-chart-2015-03-27-close

Gold rises, but the dollar must fall another notch to sustain the gold rally.

Please Click the TNX Chart to enlarge it (see related ETFs, TLT, UBT and TBT): 

tnx-10-year-treasury-note-market-timing-chart-2015-03-27-close

Rates should head lower now in the face of worldwide deflationary pressure.

CONCLUSIONS:  The U.S. stock market is tired.  Earnings warnings by Intel and other companies have slowed the rise of the SP500 Index a bit.  The Fed WILL raise rates to 0.5% by September at the latest they say, but long rates will head lower as described in detail in my prior post (see link above to “The Scenario That Will Unfold”).  A higher SP500 Index low has been formed as of this week, which allows for a rally, IF the Bulls want to retake the reigns.  I believe the U.S. markets will be higher for this year, but the short term is up for grabs.  As said, if earnings are not that bad, we’ll stay above the Dec. low.  Otherwise the October low comes into play.

I’ll go out on a limb to say that:

- stocks (SPY, SPX) will rise a bit this week off the higher low formed at the end of this past week along witha

- stronger U.S. dollar

- weaker gold

- falling interest rates (rallying Treasuries and bonds).

Of all of those predictions, I’d say that lower interest rates is the most likely for the week.  That means sticking with TLT (or UBT using 2X leverage) and municipal bonds.

I cover foreign markets on social media (see links above) and in my monthly newsletter.  Note that the newsletter is now closed again to new subscriptions: Join the Wait List to Join the Newsletter as a Loyal Subscriber, Opening again for the April. 4th issue.  If you join and don’t read the newsletter, you will be deleted.  I don’t publish to non-readers as other newsletters do.  Stay tuned here in the meantime and follow all the action via the Twitter® and StockTwits® links above.

Be sure to visit the website at: Sun and Storm Investing™

Standard Disclaimer: It’s your money and your decision as to how to invest it.

I thank Worden Brothers for the charting system I use to post these charts.  If you want to know more about the charting system I use every day, go to my “Other Resources” page here:  Other Resources   It makes it much easier to follow along with me if you can see the charts and manipulate them on your own computer.  It’s a great investment to have an excellent charting system.  Check it out with a free trial at the link above.

Copyright © 2015 By Wall Street Sun and Storm Report, LLC All rights reserved.

Posted in Bonds, gold, investment, large cap stocks, S&P 500 Index, small cap stocks, Treasuries | Tagged , , , , , , , , , , , , , | 2 Comments

Market Timing Brief for 3-26-2015: A Possible Scenario for the Fed, Rates (Bonds), Stocks, Gold, and the U.S. Dollar.

A Market Timing Report about Fed FOMC rate changes and how they may move the various markets…

Here’s my proposed scenario:

1. The Fed insists, as Fed Gov. Bullard repeated this morning, that it wants to move off “zero interest rates,” so we’ll start with that as a given, despite the probable foolishness of that short term due to the dollar strength it will create!  Maybe the Fed won’t raise rates in the end, but the scenario below still applies except that the differences would be that short rates won’t be going up as much obviously (the Fed more or less directly controls those via the Fed Funds rate) and long rates might not go down as much either.

2. Short rates rise, pushing LONG RATES DOWN.  That has happened before and it will happen again if the Fed moves now.  Why?  There is deflation at the moment, so raising rates into deflation makes no sense.  Raising short rates can pressure long rates down, because future expectations for inflation are lowered by raising interest rates in the face of deflation or very low levels of inflation.

3. The U.S. Dollar (UUP, EURUSD)?  The Fed will be behind the other central banks around the world regardless, unless QE 4 appears as @KeithMcCullough said recently.

The dollar will go up on both:

A) higher short rates which will draw cash from the rest of the world seeking a short term haven above zero interest rates (or negative interest rates as in Germany) and…

B) as mentioned, the lack of a U.S. QE program, which keeps the U.S. behind the rest of the world on currency destruction.

4. Stocks (SPX, SPY, RUT, IWM)?  U.S. Stocks rise as they’ve done repeatedly before on slowly rising rates.  I went over that here: Rates Rise, Stocks Rally.  This will happen as long as recession stays out of the picture and even slow growth continues in U.S. GDP.  Stocks will weaken at times the economy/GDP appears to be decelerating of course.  So we buy some more at the lows and sell some at the highs.

5. Gold (GLD)?  With the dollar up and inflation still under control in the U.S., gold is pressured (after current rally is over and dollar resumes its climb).  Easing by rest of world keeps it in demand though, so gold is sideways to down somewhat, after the current rally ends.  Careful though: Gold will reach new lows on worldwide recovery IF that happens. 

6. Treasuries and Bonds?  Long rates will be lower as said, so U.S. Treasuries (TLT, UBT) and other bonds rally.

And all this changes if there is a new QE program in the U.S.  Remember that the picture we are seeing is constantly changing, so we need to be willing to change our view accordingly.

**Fund Funds Rate Reference

NOTE: I cover foreign markets on social media (see links above) and in my monthly newsletter.  The newsletter is now closed again to new subscriptions: Join the Wait List to Join the Newsletter as a Loyal Subscriber, Opening again for the April. 4th issue.  If you join and don’t read the newsletter, you will be deleted.  I don’t publish to non-readers as other newsletters do.  Stay tuned here in the meantime and follow all the action via the Twitter® and StockTwits® links above.

Be sure to visit the website at: Sun and Storm Investing™

Standard Disclaimer: It’s your money and your decision as to how to invest it.

I thank Worden Brothers for the charting system I use to post these charts.  If you want to know more about the charting system I use every day, go to my “Other Resources” page here:  Other Resources   It makes it much easier to follow along with me if you can see the charts and manipulate them on your own computer.  It’s a great investment to have an excellent charting system.  Check it out with a free trial at the link above.

Copyright © 2015 By Wall Street Sun and Storm Report, LLC All rights reserved.

Posted in Bonds, gold, investment, large cap stocks, S&P 500 Index, small cap stocks, Treasuries | Tagged , , , , , , | Leave a comment

Market Timing Brief for the 3-20-2015 Close: Stocks Will Go Higher In Time. Gold Has A Shot. Rates Will Fall Further.

A Market Timing Report based on the 3-20-2015 Close, published Sunday March 22nd, 2015

I keep my comments reasonably brief to honor both my time and yours.  The rest is on Twitter®/StockTwits®.

Let’s see how I did with:

CONCLUSIONS FROM LAST WEEK

U.S. stocks may be at a pivot point, where a bounce will occur. 

Right.

Small caps suggest a bounce, while large caps are lagging, still below the prior breakout. 

Right.  Small caps led the bounce too.

Follow interest rates, and you’ll know where stocks will go, because you’ll know where the U.S. dollar is going.

Right. The dollar jerked around but has fallen from the last high. 

Gold must hold support, or we’ll have another free fall.

Gold did hold. Free fall avoided for now.

I should claim victory, as we were overexposed to the stock markets of the world prior to the most recent rally back.  The thing is, the direction of the market changes often, so there is an opportunity to be right and wrong within any extended period of time.  What HAS been right is STAYING IN THE STOCK MARKET and U.S. TREASURIES.

(If you have not yet read what will happen IF the Fed raises rates, you’ve just got to read this: It’s Not What You Think)

Most individual investors are incapable of sitting still and letting stocks do their thing.  They jerk their money in and out, often at the exact wrong times.  If you have been doing this for most of your life, there is still hope.  NOW STOP IT!  Did you hear that?  STOP SCREWING UP YOUR INVESTMENT RESULTS BY OVERTRADING!  Post that on your office wall, and you’ll make a fortune investing from here on.

There is no recession in view and the Fed this week did what I thought they would.  They removed the word patient and then said they’d have to be patient!   The exact wording did not matter.  They simply needed the market do know that they were not on some stupid Fed autopilot that said they HAVE to raise rates in June.  They re-calculated their incorrect projections for our economy and lowered them.   I’ll show you the charts now.

SP500 Index (SPX, SPY; click the chart to enlarge it):

SP500 Index moves higher

Stocks continue their rally.

Next stop for the SPX?  The orange, majenta, or yellow trend lines shown in the above chart.  We will likely match the prior high, but I’m guessing we’ll get to a new high.  Earnings are due to fall this quarter, so there could be bumps along the way, but as long as the Fed is out of the way, rates are under control, and growth continues, albeit at a slower pace, stocks will do OK.

To find out what I’m doing, including buys and sells, please follow me here: Follow Me on Twitter®.   Follow Me on StockTwits®   You don’t have to make comments yourself to read my messages.

Small caps are stronger once again.  Valuations are now worse that a year ago according to L. Birinyi and the Wall St. Journal: Small Cap Valuations Too High Once Again

You can buy small caps despite higher valuations and stay with them for a while, but they will fall harder during pullbacks.  Buy low, sell high.  I’m using a different strategy, however, which is to leverage my large cap exposure.  I am not using margin, just deploying more cash than usual.  This may NOT be appropriate for you depending on your situation.

Russell 2000 U.S. Small Cap Chart (RUT, IWM; click the chart to enlarge it):

Small Caps Rule

Small caps run ahead of the SP500 Index.

Gold: GLD survived support at 109.67.  Gold still has the headwind of the U.S. dollar, which has been whipping around since the Fed statement and pony show.  But now rates are moving lower again, so the dollar may pull back as well.

What’s the cleaner bet that may be better than gold here?  Investing in Treasuries as shown in the 2nd chart below.

The Gold ETF Chart (GLD; click to enlarge the chart):

Gold faces dollar strength still.

Gold survived support for now.

The U.S. 10 Year Treasury Note: Keep buying every rise in rates (fall in Treasuries/TLT).  The only thing we can be certain of is that the 10 Year Treasury is going to keep falling to catch up to the rest of the world.  Either that or the Fed kills the U.S. economy. Now what do you really think they will do???  Buy TLT on every pullback until this changes (inflation rears its head).

Please Click the TNX Chart to enlarge it (see related ETFs, TLT, UBT and TBT; NOTE THIS IS A WEEKLY Chart): 

Rates will fall more.

Rates will move lower. It is all but guaranteed.

CONCLUSIONS:  The SP500 will move still higher.  The Fed will ensure that by keep interest rates low for a long time. 

Our rates are still higher than the rest of the developed world.  They must head lower.  It has nothing to do with that being “good” or “right.”  It has to do with what is going to happen.  Rates will head still lower.  That will keep gold from breaking support, but the U.S. dollar must keep falling from here to have gold rally in a much more substantial way. 

Some think the U.S. is not willing to join Europe in easing with a U.S. QE 4, so the dollar will stay relatively strong, even if the Fed does not RAISE rates.  That, if true, is a headwind for gold, which needs negative real rates (meaning inflation exceeding interest rates on Treasuries) and a stable to falling dollar to flourish.

My prediction in the short term is different from that.  I say in the next week, rates will break the support shown in the above chart (below prior low), the dollar will trade lower, and gold (and the SP500) will move higher.  We’ll check back next week to see if that was right.

In the meantime, due what is a GIVEN almost over the intermediate term, LOWER U.S. RATES will cause Treasuries to rally from here (think TLT).  This interest rate bet is even better than the bet on U.S. stocks, because soft Q1 earnings could cause stocks to thrash around in a few weeks.

Remember that if you did not buy when we bought, this is not the ideal time to buy.  Your risk is higher now.  If you must, buy some here and wait for the next pullback in stocks and Treasuries to buy more.

I cover foreign markets on social media (see links above) and in my monthly newsletter.  Note that the newsletter is now closed again to new subscriptions: Join the Wait List to Join the Newsletter as a Loyal Subscriber, Opening again for the April. 4th issue.  If you join and don’t read the newsletter, you will be deleted.  I don’t publish to non-readers as other newsletters do.  Stay tuned here in the meantime and follow all the action via the Twitter® and StockTwits® links above.

Be sure to visit the website at: Sun and Storm Investing™

Standard Disclaimer: It’s your money and your decision as to how to invest it.

I thank Worden Brothers for the charting system I use to post these charts.  If you want to know more about the charting system I use every day, go to my “Other Resources” page here:  Other Resources   It makes it much easier to follow along with me if you can see the charts and manipulate them on your own computer.  It’s a great investment to have an excellent charting system.  Check it out with a free trial at the link above.

Copyright © 2015 By Wall Street Sun and Storm Report, LLC All rights reserved.

Posted in Bonds, gold, investment, large cap stocks, S&P 500 Index, small cap stocks, Treasuries | Tagged , , , , , , , , , , , , , | 2 Comments

Market Timing Brief for 3-18-2015: What Actually Happened to Stocks When Fed Interest Rates Rose in the Past?

A Market Timing Report about Fed FOMC rate changes and how they have effected the U.S. Stock Market (SPX, SPY) historically…

Fed Funds Rates: Rapidly Falling Rates Are Negative for the U.S. Stock Market (SP500).  Rising Rates Are Mostly Bullish for Stocks.

12-1992 = low of 2.92%

Rates rose and stocks rose strongly.  The low was followed by minor SP500 Index downside and some volatility then a strong rally.

4-1995 = high of 6.05%

No significant SP500 Index downside, then strong rally, but situation was not at an extreme.  This was proven by the fact that rates did not drop much for the next few years. Next low was fairly high, at 4.63% in 1-1999.  In addition, stocks were not that expensive in 1995 vs. 2000.

1-1999 = low of 4.63%

Rates rose and stocks rose strongly.  No significant SP500 Index downside, then strong rally through 1999, the biggest bubble ever in our markets.

7-2000 = high of 6.54%

Rates were lowered quickly and stocks crashed.  SP500 Index sold off hard after that from the July 2000 lower highs in both NASDAQ and SPX. 

12-2003 = low of 0.98%

Rates rose and stocks rose strongly.  Market had rallied strongly in 2003, then after the 12-2003 low in rates rallied further, gave up the gains, and then rallied up until 2007.

2-2007 = high of 4.26%

Rates were lowered quickly and stocks crashed.  Market sold off, then rallied to new high, gave up all gains, then hit a marginal new high and sold off massively from 10-11-2007 top of 1576.09 to 666 on March 6, 2009 intraday.

2015?  

Is it different this time, or should we expect rising rates to be GOOD for the market? What are the implications for share buybacks with rising rates? How much will growth of earnings per share fall if rates rise X%?

CONCLUSIONS: Unless it is truly different this time, due to distortions of ultra-low rates and the massive Fed balance sheet, it won’t be different this time in the stock market!  I challenge my colleagues to do the calculation of the impact on earnings growth when stock buybacks become more expensive, or come up with other feasible reasons that it is in fact different this time.  Stanley Druckenmiller has said he does not know if the Fed can get out of its balance sheet without causing trouble OR NOT.  Not knowing is being more honest than saying you know, but for no good reason!

History says that gradually rising rates have not been bad for the market for the past few decades.  The backdrop today is very unusual though, as U.S. dollar strength will only get worse if the Fed raises rates while the rest of the world is lowering rates. 

My opinion?  Though I am no fan of low rates, given the Fed’s goals, keeping them steady until a low level of inflation (their 2% goal) returns might be more prudent than raising rates simply to get them “off zero.”

**Fund Funds Rate Reference

NOTE: I cover foreign markets on social media (see links above) and in my monthly newsletter.  The newsletter is now closed again to new subscriptions: Join the Wait List to Join the Newsletter as a Loyal Subscriber, Opening again for the April. 4th issue.  If you join and don’t read the newsletter, you will be deleted.  I don’t publish to non-readers as other newsletters do.  Stay tuned here in the meantime and follow all the action via the Twitter® and StockTwits® links above.

Be sure to visit the website at: Sun and Storm Investing™

Standard Disclaimer: It’s your money and your decision as to how to invest it.

I thank Worden Brothers for the charting system I use to post these charts.  If you want to know more about the charting system I use every day, go to my “Other Resources” page here:  Other Resources   It makes it much easier to follow along with me if you can see the charts and manipulate them on your own computer.  It’s a great investment to have an excellent charting system.  Check it out with a free trial at the link above.

Copyright © 2015 By Wall Street Sun and Storm Report, LLC All rights reserved.

Posted in Bonds, gold, investment, large cap stocks, S&P 500 Index, small cap stocks, Treasuries | Tagged , , , , , , | Leave a comment

Market Timing Brief for the 3-13-2015 Close: Rates Are In Charge of the U.S. Dollar, Stocks and Gold. Rate Rise Over Yet?

A Market Timing Report based on the 3-13-2015 Close, published Sunday March 15th, 2015

UPDATE 3-17-2015: And the Winner Is?  Small Cap Growth as shown:

rut-small-caps-growth-vs-value-market-timing-chart-2015-03-17-1211pm

Small Cap Growth Is Beating Small Cap Value and the SP500 Index.

And now back to this week’s issue: I keep my comments reasonably brief to honor both my time and yours.  The rest is on Twitter®/StockTwits®.

The recent stock market selling, in my view, is due to rates going up in fear of the Fed raising interest rates into worldwide deflation (although maybe the rise ended last week).  Perhaps Jim Cramer should pull out and replay his “They know nothing!” tirade about the Fed during the 2008 crisis.  Of course, what the Fed SHOULD do and what the Fed WILL do are two different things.

My belief is that the Federal Reserve has introduced great distortions into the monetary system by making it easy for companies like IBM to borrow money at dirt cheap rates and then buy back their stock to raise their earnings per share without innovating and thereby strongly growing revenue.  It is a Fed driven scam really (I’m sure there are many noble people at IBM who mean well), and it’s unproven that it will work or not work in the end as Stanley Druckenmiller has pointed out.  He thinks the tricks won’t work at IBM as he had publicized his short repeatedly.  But he also said on CNBC that he really did not know whether the Fed could get out of its balance sheet safely or not.

Those that tell you the Fed balance sheet will result in hyperinflation are likely as lacking in true insight as those who think the Fed can expand its balance sheet without limit.  The only thing we know is that the longer they take to unwind it, the less flexibility they will have to do anything the next time action is actually needed.   That is why the Fed is going to raise interest rates a bit even though there is worldwide deflation in the midst of now worldwide easing outside the U.S. and the U.K.  Meanwhile, the Eurozone, Japan and China are all easing.

But there is downside to this tactic in U.S. corporate multinational earnings, because with every move UP in U.S. rates, up goes the U.S. dollar and down goes the competitiveness of U.S. multinationals in the short to intermediate term.   I believe this is the most important reason stocks could struggle for a while.

Investors need to hold NON-struggling companies in the near term.  That is why small caps are being favored in this pullback as they have less U.S. dollar exposure.  They have bounced more than large caps as shown below (despite their higher valuations – if an individual small cap’s growth matches its valuation, it’s not an issue).  Near term, profits for the SP500 Index are supposed to decline a bit in the first quarter.  This is happening to an extent due to U.S. dollar strength.  This will pressure U.S. multinational stock prices until other foreign currencies stabilize vs. the U.S. dollar.  If the U.S. dollar keeps moving higher, expect the SP500 Index to move lower.

SP500 Index (SPX, SPY; click the chart to enlarge it):

sp500-index-market-timing-chart-2015-03-13-close

Pivot point. Up or down from here?

To find out what I’m doing, including buys and sells, please follow me here: Follow Me on Twitter®.   Follow Me on StockTwits®   You don’t have to make comments yourself to read my messages.

Small caps are stronger, as mentioned above.  Stick with the high growers!  Stock pickers will be looking for growth in a slowing economy this year.  Small caps REGAINED their prior breakout, while the SP500 Index has not.  Compare the chart below with the SP500 chart above.

Russell 2000 U.S. Small Cap Chart (RUT, IWM; click the chart to enlarge it):

rut-small-cap-russell-2000-index-market-timing-chart-2015-03-13-close

Small caps are holding up better than large caps.

Gold has now basically destroyed its prior rally.  Last GLD support is at 109.67 as mentioned last week.  Watch interest rates and the U.S. dollar.  

Gold should hold the prior low IF:

1. Rates stopped going up as of last week.

2. The U.S. dollar starts to ease. 

Only in a financial panic can gold and the U.S. dollar rise together.  We don’t have such a panic at the moment.

The Gold ETF Chart (GLD; click to enlarge the chart):

gld-gold-etf-market-timing-chart-2015-03-13-close

Gold nears last support.

The U.S. 10 Year Treasury Note:

Please Click the TNX Chart to enlarge it (see related ETFs, TLT, UBT and TBT; NOTE THIS IS A WEEKLY Chart): Rates hit the 200 day moving average and moved down this past week.  A new high in rates may cause gold to fail its support.  The stock market fear of the Fed is due to fear of U.S. dollar strength in the absence of strong economic growth.

tnx-10-year-treasury-note-market-timing-chart-2015-03-13-close

Have rates stopped rising?

CONCLUSIONS: U.S. stocks may be at a pivot point, where a bounce will occur.  Small caps suggest a bounce, while large caps are lagging, still below the prior breakout.  Follow interest rates, and you’ll know where stocks will go, because you’ll know where the U.S. dollar is going.

Gold must hold support or we’ll have another free fall.

Rates are driving the above almost single-handedly.  Follow rates and you know what gold and stocks will do near term.  When growth picks back up, this will change and we should expect gradually rising rates.

I cover foreign markets on social media (see links above) and in my monthly newsletter.  Note that the newsletter is now closed again to new subscriptions: Join the Wait List to Join the Newsletter as a Loyal Subscriber, Opening again for the April. 4th issue.  If you join and don’t read the newsletter, you will be deleted.  I don’t publish to non-readers as other newsletters do.  Stay tuned here in the meantime and follow all the action via the Twitter® and StockTwits® links above.

Be sure to visit the website at: Sun and Storm Investing™

Standard Disclaimer: It’s your money and your decision as to how to invest it.

I thank Worden Brothers for the charting system I use to post these charts.  If you want to know more about the charting system I use every day, go to my “Other Resources” page here:  Other Resources   It makes it much easier to follow along with me if you can see the charts and manipulate them on your own computer.  It’s a great investment to have an excellent charting system.  Check it out with a free trial at the link above.

Copyright © 2015 By Wall Street Sun and Storm Report, LLC All rights reserved.

Posted in Bonds, gold, investment, large cap stocks, S&P 500 Index, small cap stocks, Treasuries | Tagged , , , , , , , , , , , , , | Leave a comment

Market Timing Brief for the 3-06-2015 Close: SP500 Index Breakout Reversed. The Gold Trade Fails. Rates Rising On Fed Fears.

A Market Timing Report based on the 3-06-2015 Close, published Sunday March 8th, 2015

I keep my comments brief to honor both my time and yours.  The rest is on Twitter®/StockTwits®.

Here is the lay of the land for the LONG TERM World Economic Picture:

1. The world economy is slowing outside of the U.S.

2. The entire world other than the U.S. and the U.K. is planning more easing of monetary policy.

3. There is a fear that arose last week that the economic data in the U.S. is too strong, which will force the Fed to raise rates, perhaps more than “one and done.”  If that happens, it provides competition for stocks for investors who want a safer return at higher rates than are available today.  This would bring down stock and bond prices. That’s why they fell last week, but see the next section to understand why they are likely to rise again before they fall too far (does not preclude up to 10% corrections).

4. The slowdown abroad will keep the U.S. economy from expanding too rapidly and corporate profits are already lower due to dollar strength.

5. The Fed will raise rates marginally over 1-2 meetings and be done at about 0.5% off zero after one to two meetings due to the weakness of the world economy.

6. Eventually all the fuel added to the fire WILL work and there will be too much inflation despite the slow growth of the world economy.

7. Central banks will have to tighten to prevent prices from rising rapidly.  The Fed’s mandate includes both employment and inflation, and it will be forced to act at a certain point.

8. Government fiscal policy will have to change because the Fed and other Central Banks will be powerless to stimulate the economy due to inflation.  All they will be able to do is to fight the inflation they will eventually create.

9. The stock market will be in a slump for 5 years or more if nothing is done on the fiscal side or if innovation stalls over the next few years.  Relying on Congress to get something done has not been a reliable investment thesis!

The SHORT TERM Picture is Much Different (remember that this is an HYPOTHESIS):

1. Rates will stay low for a while around the world including in the U.S. due to pressure of other foreign banks with zero to sub-zero rates.

2. This will fuel equity prices further.  The rally will continue for a year or two here and abroad.  The current correction should be no more than 10% and could be shallow in the U.S., as the U.S. economy is still growing.  If Europe does not respond to ECB QE, those markets will suffer, but the expectation is that this will work as it did in the U.S.   If you buy that, buy Europe.  I’ve bought the U.K., because it should benefit from the ECB easing while not suffering a currency decline to the extent that the Euro has and will continue to sustain.  HEDJ has worked well lately, but if the Fed is forced to stand aside, the dollar could take a hit.  It might be smartest to be currency neutral by buying both a U.S. dollar hedged and a non-USD hedged Eurozone ETF.

3. Gold will maintain its value, but stays range bound for several years until inflation picks up again or the U.S. dollar is damaged by further Fed policy interventions such as QE.  If gold breaks to new lows, I’d consider stepping aside until a bottom is formed again.  If it holds the recent range, I’d keep some gold on board for a hedge against inflation.

How about the very immediate term?  The SPX has failed its prior breakout.  I mentioned last week that we’d have to fall below the prior breakout at 2093.55 to void it.  We did.  Some were buying on Friday.  They may be right for a day or two, but there is plenty of room for this pullback to continue.  For example, we could bounce from around the 50 day moving average and then fail again.

SP500 Index (SPX, SPY; click the chart to enlarge it):

sp500-index-market-timing-chart-2015-03-06-close

Breakout has failed. Will we recover it quickly or is this going to be a significant correction?

To find out what I’m doing, including buys and sells, please follow me here: Follow Me on Twitter®.   Follow Me on StockTwits®   You don’t have to make comments yourself to read my messages.

Small caps have failed their breakout as well.  I mentioned last week that the valuation of the RUT is stretched almost to where it was a year ago (per Wall Street Journal stats).  We need to fall further to bring valuations down to a more reasonable level perhaps, especially if the Fed raises rates too much.

Russell 2000 U.S. Small Cap Chart (RUT, IWM; click the chart to enlarge it):

rut-small-cap-russell-2000-index-market-timing-chart-2015-03-06-close

Another failed breakout.

Gold has all but destroyed its rally.  There is one more level of support below this at 109.67 and then an opportunity to go into free fall.  It would seem with all the easing going on around the world, that this should not happen.  It would seem that gold would be a good deal still under those circumstances.  Sometimes the market has a different idea about what is happening than what the theory says.  Use stops on your positions.

The Gold ETF Chart (GLD; click to enlarge the chart):

gld-gold-etf-market-timing-chart-2015-03-06-close

Gold must hold the prior base or we’ll have another free fall.

Please Click the TNX Chart to enlarge it (see related ETFs, TLT, TBT and UBT): Rates rose despite the downward pressure from abroad.  It seems that the rise is unsustainable given that, but the TNX will have to reverse soon to prove it.  Perhaps it will happen at the 200 day moving average or the yellow resistance line shown.

tnx-10-year-treasury-note-market-timing-chart-2015-03-06-close

Rates rising again on Fed fear.

CONCLUSIONS: The U.S. stock market breakouts were both lost.  Even if we get a bounce here, there is a danger that the market has reset to the notion that the Fed is raising rates and that it will do so too aggressively.  I don’t believe it can raise rates significantly, so I expect the equity markets to continue to do well in the short term despite 3% dips and 10% corrections this year.  Buy the lows and sell some at the highs. 

The gold entry from last week was a bust, but there is one last level of support, before another free fall begins.   Make you nervous?  That is the nature of markets and at times, they fall just below support to scare out the most weak hands before rising strongly.

From last week, and this is still true in my opinion: “The recent Federal Reserve speeches are all aligned with a more dovish Fed policy despite their threat of moving the Fed Funds rate off zero.”  That means rates will go lower again.  From what level they fall is the issue we face in the near term.  No one can answer that unfortunately. 

I cover foreign markets on social media (see links above) and in my montly newsletter.  Note that the newsletter is now closed again to new subscriptions: Join the Wait List to Join the Newsletter as a Loyal Subscriber, Opening again for the April. 4th issue.  If you join and don’t read the newsletter, you will be deleted.  I don’t publish to non-readers as other newsletters do.  Stay tuned here in the meantime and follow all the action via the Twitter® and StockTwits® links above.

Be sure to visit the website at: Sun and Storm Investing™

Standard Disclaimer: It’s your money and your decision as to how to invest it.

I thank Worden Brothers for the charting system I use to post these charts.  If you want to know more about the charting system I use every day, go to my “Other Resources” page here:  Other Resources   It makes it much easier to follow along with me if you can see the charts and manipulate them on your own computer.  It’s a great investment to have an excellent charting system.  Check it out with a free trial at the link above.

Copyright © 2015 By Wall Street Sun and Storm Report, LLC All rights reserved.

Posted in Bonds, gold, investment, large cap stocks, S&P 500 Index, small cap stocks, Treasuries | Tagged , , , , , , , , , , , , , | Leave a comment

Market Timing Brief for the 2-27-2015 Close: SP500 Index Breakout Still Intact. Gold’s A Buy. Rates Should Move Down. Will They?

A Market Timing Report based on the 2-27-2015 Close, published Sunday March 1st, 2015

I’m continuing with the terse comment format this week.  The rest is on Twitter®/StockTwits®.

The SPX has maintained its prior breakout.  See the purple line?  That line is an upward wedge line that was previously broken.  We must rise above that level to void it as a technical landmark.  The bullish argument is that the market has broken out to new highs, and we’d have to fall below the prior breakout at 2093.55 to void it.

SP500 Index (SPX, SPY; click the chart to enlarge it):

sp500-index-market-timing-chart-2015-02-27-close

SPX keeps its breakout.

To find out what I’m doing, including buys and sells, please follow me here: Follow Me on Twitter®.   Follow Me on StockTwits®   You don’t have to make comments yourself to read my messages.

Small caps have had a clean breakout.  They must hold it.  The valuation of the RUT is stretched almost to where it was a year ago (per Wall Street Journal stats).

Russell 2000 U.S. Small Cap Chart (RUT, IWM; click the chart to enlarge it):

rut-small-cap-russell-2000-index-market-timing-chart-2015-02-27-close

Small caps also have an intact breakout.

Gold appears to have found a base.  Buying here with a stop would be a reasonable trade set-up.  Given the massive money printing happening all over the world, gold should hold up for the time being.

The Gold ETF Chart (GLD; click to enlarge the chart):

gld-gold-etf-market-timing-chart-2015-02-27-close

Has gold found a base? Probably.

Please Click the TNX Chart to enlarge it (see related ETFs, TLT, TBT and UBT): Rates could be falling again.  There are those who believe that the Federal Reserve will raise rates a bit simply to come off the near zero level.  Rates abroad will continue to pressure U.S. rates to the downside.

tnx-10-year-treasury-note-market-timing-chart-2015-02-27-close

Rates should fall. Will they?

CONCLUSIONS: The U.S. stock market breakouts are intact.  Gold is a decent trade from here using a stop.  The recent Fed speeches are all aligned with a more dovish Fed policy despite their threat of moving the Fed Funds rate off zero.

I cover foreign markets on social media (see links above) and in my montly newsletter.  Note that the newsletter is now closed again to new subscriptions: Join the Wait List to Join the Newsletter as a Loyal Subscriber, Opening again for the April. 4th issue.  If you join and don’t read the newsletter, you will be deleted.  I don’t publish to non-readers as other newsletters do.  Stay tuned here in the meantime and follow all the action via the Twitter® and StockTwits® links above.

Be sure to visit the website at: Sun and Storm Investing™

Standard Disclaimer: It’s your money and your decision as to how to invest it.

I thank Worden Brothers for the charting system I use to post these charts.  If you want to know more about the charting system I use every day, go to my “Other Resources” page here:  Other Resources   It makes it much easier to follow along with me if you can see the charts and manipulate them on your own computer.  It’s a great investment to have an excellent charting system.  Check it out with a free trial at the link above.

Copyright © 2015 By Wall Street Sun and Storm Report, LLC All rights reserved.

Posted in Bonds, gold, investment, large cap stocks, S&P 500 Index, small cap stocks, Treasuries | Tagged , , , , , , , , , , , , , | Leave a comment