Market Timing Brief for the 5-15-2015 Close: SP500 Testing Above a Top. Small Caps Weaker. Gold Testing Above a Top. Interest Rates Fail a Breakout.

A Market Timing Report based on the 5-15-2015 Close, published Sunday May 17th, 2015

I deliver extremely focused comments on the markets.  These are supplemented with “Tweets/StockTwits” (see links below).

SP500 Index: Testing just above a prior important top.  Frankly, these new highs can fail, but they can also lead to new highs.  They are possible turning points.  It’s far better to buy lower than to buy once the breakout is happening.  We’ve already bought and hedged a bit, and we’ll let the market show us the way. 

The chart overall is more positive than negative now, as it is an ascending triangle (higher lows with a flat top).  We are now seeing an attempted breakout above the top of the triangle, to which this Bullish formation is supposed to commonly lead.  The SPX is actually just below the prior intraday all time high of 2125.92. 

sp500-index-market-timing-chart-2015-05-15-close

Testing above a prior high. Looking for a new breakout.

US Small Cap Index (RUT, IWM): Has been lagging the small caps due to recent dollar strength, which may be reversing now.  But they are overvalued if the economy is in fact slowing, which recent data suggests.

rut-small-cap-index-market-timing-chart-2015-05-15-close

Small caps are lagging large caps. And they’re overvalued.

Gold ETF (GLD): Gold investors will be happier if rates keep falling and lean toward creating negative real rates as discussed.   If you have not read my recent article on gold investment, please do and save yourself a fortune in bad gold bets: Gold Investing Secrets

gld-gold-etf-market-timing-chart-2015-05-15-close

Gold needs to keep moving up. Watch for a stall.

U.S. 10 Year Treasury Note (TNX,TYX, TLT, UBT, TBT).: The last breakout to new highs in yields failed, so the Bulls have the edge here.  I added more exposure recently to TLT.  A bit early.  Lower rates will help gold too.  This breakdown in yields came with the softer economic data this week (see my messages on Twitter®Follow Me on Twitter®.   Follow Me on StockTwits®).

tnx-10-year-treasury-note-market-timing-chart-2015-05-15-close

Rates are falling again.

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

Why the World is Selling US Dollars and Treasuries: The Relativity Game

The US dollar (USDX, EURUSD) has been in decline despite rising interest rates (the dollar is up slightly today, but it looks like a blip compared to 10 Year Treasury yields that are banging UP against major resistance; TNX, TYX, TLT, TBT, UBT), which leads me to conclude that some of the selling is foreigners moving out of dollars by selling U.S. Treasuries to buy foreign debt and foreign stocks that have been rallying.

Why they are selling U.S. Treasuries does not matter, but let’s play anyway.  In Europe, investors may have sold U.S. Treasuries to ride the “Draghi train” to sub-zero rates.  That would cause U.S. rates to rise, and Euro rates to fall.  And they are also using the proceeds to buy European stocks that have been rallying. It could also be that the Chinese are already selling or will sell U.S. Treasuries to pressure the U.S. into allowing the IMF to declare the yuan a reserve currency in October.  I favor that the prior influence is much greater, and the latter is obviously highly speculative.

Recently the dollar HAD BEEN getting stronger based on the notion of higher Fed rates (not necessarily a correct assumption, because higher short rates can flatten the curve by causing long rates to fall while short rates rise).
Short dated Treasury yields should rise in that circumstance, while long dated Treasuries like 10 and 30 year issues should decline in yield, all else staying equal.

Or is it the threat of a weakening U.S. economy or the Fear of the Fed driving longer rates higher?  Many would disagree with this notion, but again, let’s play with this a bit.  What has changed could be that 1. the U.S. economy is not as strong as hoped, which depresses interest in U.S. stocks by foreigners, who are already running to their own stock markets due to falling rates, resulting in less dollar demand and hence, less demand for U.S. Treasuries.  2. Rates are rising due to Fed threats to lower the Fed Funds rate off zero, which could ironically tank the U.S. economy and force it into recession, which is always a big negative for stocks.  A bad economy means a weaker dollar in the end too.  A weaker dollar means higher borrowing costs and yields eventually.  Investors don’t want their money in a country with a failing or slowing economy, as then their debts may not be paid off.  If rates were rising because the U.S. economy is actually strong, then the dollar would be rising.  It’s now weakening.

In the end, I believe the main influence on Treasury yields has been the higher demand for central bank debt outside the U.S.  U.S. rates became low enough that the remaining returns seemed too low compared to other options, despite already LOWER yields in some of those foreign locations.

A lot of this could be short term speculation driven by Dr. Draghi of the European Central Bank (ECB) in the Eurozone, where German Bunds were recently showing negative yields out EIGHT years on the curve.  That means you had to PAY to hold an 8 year German bond.  German Bunds are now “only” negative out for 4 years today after Bill Gross said on April 21st that they were the “short of a lifetime”  Not talking his book was he?  Naaaaaaaah.  ; )  (I like Bill anyway.  ; )  He says what he believes to be true and is often right.)

In the end, as long as the Federal Reserve is not behind on preventing >2% inflation, higher short Fed rates should push longer term interest rates DOWN, flattening the yield curve, and causing Treasuries/Bonds to rally, not sell off as they’ve been doing.  The recent moves seem most likely to have been motivated by better prospects outside the U.S.

But guess what?  As it’s nearly impossible to sort out which headwinds vs. tailwinds will win, we follow the market timing charts for our final call.

So far, the recent charts say dollar weaker, gold up weakly, stocks up a bit without making new bold highs, and rates rising but nearing resistance.

If too much inflation does show up eventually, the bond market will drag the Fed into raising rates whether they want to or not, as they have a dual mandate of adequate employment (which they have no clue as to how to determine) PLUS 2% inflation.  Until then as the world fights off slower economic growth, that does not appear to be an imminent threat.

If you appreciated this post, please say so below in the box labeled “Leave a Reply” and post it to Facebook or other social media. 

Thank you for using your valuable time to make a comment.

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.

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 July 5th 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, investment, Treasuries, US Dollar Index | Tagged , , , , , , , , , , , , | 2 Comments

When Does Gold Shine and When Does it Decline? The “Secret Formula” for Successful Gold Market Timing.

“What makes gold work as an investment and when does it become a portfolio disaster?”

When Does Gold DECLINE?

Let’s handle the “bad news” first.  I said in my update of last week’s blog post: “Gold is not a good trading idea if the economy is indeed going to improve dramatically.”  Employment was good this week, about at consensus, while the prior month was revised down to a sub-100 K value, which is extremely weak.

If the economy is booming, stocks are rising rapidly, interest rates are rising ahead of inflation keeping real rates positive, and the U.S. dollar is strong, gold does horribly.  You don’t need dollar insurance when the dollar is rising, and you don’t need to protect yourself against a decline in stocks when the economy booms for years in a row.  That’s why gold was a horrible investment in the 1990’s.  There was a huge economic boom, despite the bust to follow.  Gold tanked.

When Does Gold SHINE? 

In economic terms, there are three “secret” ingredients needed for gold (GLD; gold ETF) to shine.  These are secret if you don’t know them!

First, gold  does best with negative real interest rates, which means inflation above the rate of return of interest bearing instruments like bonds (10 Year Treasury Note (TNX), 30 Year Treasury Bond (TYX), corporate bonds (LQD) etc.).  The rate of change of real interest rates can accelerate a move in gold prices as the market perceives that as a threat to price stability.

Second, gold also does well when the currency it’s measured against goes down, not up.   A weak U.S. dollar (expressed as the US dollar index) makes gold more valuable to U.S. citizens, because it then takes more dollars to buy it.  A trend in this direction increases demand,  speaking of which…

Third, gold goes up when it’s in demand worldwide.  Demand means total trading demand worldwide, so gold naturally does best when it is rising in market timing terms in multiple important currencies worldwide than when it is just performing well in one currency.  If gold is rising in multiple major currencies including the U.S. dollar, the Euro, the Yen, and the British pound, for example, gold often continues to do well.

This means that the trend itself is important, and to that extent, you need to do market timing of your investments in gold.  Yes, gold often goes up, because it’s going up over a period of time that convinces the market that gains will continue.  This means it can be overdone to the upside at times, and corrections ensue for example, as real interest rates change, or demand falls due to greater worldwide financial stability.

It is theoretically possible for influences like advertising to cause gold prices to rise.  A big systemic shift in what financial advisors say about gold’s value as insurance or  an investment would help or hurt the price of gold.

A currency-driven financial panic can have a big effect on gold prices as we saw when the Euro seemed in peril.  In that situation, the U.S. dollar AND gold can do well.  They are both in high demand during a panic out of Euros.

So the ideal environment for owning gold (GLD) is: 1. Negative real rates of return  2. A weak dollar.  3. Sufficient demand worldwide vs. supply with rising prices in multiple major currencies.

Supply is not a big issue with gold, because the supply is constrained by its rarity.  It could have an influence if there were a lot of gold selling all at once as it is always in the end supply vs. demand as with anything else that is bought and sold.

Gold has been weak because “1” (see above) has been lacking with rising real interest rates, “2” is missing, i.e., the dollar has not been weak enough, and “3” the world is not in panic mode, so demand for gold has fallen.  The weak dollar has been the main force preventing lower lows in the gold price.  Gold is a hold as “insurance” in our long term view of gold as U.S. dollar insurance, and we have no trading position currently.

For now, if the economy remains sluggish, gold will do fine IF rates resume their fall and IF negative real rates prevail, while the dollar does not strengthen dramatically, which it should not if rates are falling, and the world is not in “Euro panic” mode.

If you read this at a later date, just apply the principles the same way we are doing here with the current facts.  They will help you make a better decision on whether to buy or sell gold.

If you appreciated this post, please say so below in the box labeled “Leave a Reply” and post it to Facebook or other social media. 

Thank you for using your valuable time to make a comment.

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.

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 July 5th 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, Treasuries | Tagged , , , , , , , , , , , , , | Leave a comment

Market Timing Brief for the 5-01-2015 Close with 5-10-2015 UPDATE: Stocks Falter at a High. Gold Loses Some Luster. Rates Rising But Nearing Resistance.

A Market Timing Report based on the 5-01-2015 Close, published Saturday May 2nd, 2015

I deliver extremely FOCUSED comments on the markets.  These are supplemented with “Tweets/StockTwits” (see links below).

UPDATE 5-10-2015:

Dr. Yellen, our esteemed Fed Chair said U.S. stocks were overvalued in comments she made this week.  The market reacted by rallying much as they did following Alan Greenspan’s similar “over-exuberance” comments.  I am seeking to buy individual well valued companies vs. indices where I can, but I do have index exposure too.  I’ve hedged some of that by selling options, which helps add income even when stocks trade in a sideways manner.

SPX (SP500 Index): Up against resistance already.  Not a great place to buy.  We did some buying just before the jobs report, which was worthwhile (see Twitter®/StockTwits® Links below).  The range is more narrow, so you have to buy the bottom quickly or it just does not pay.

RUT (US Small caps): Better buying position, but lagging the large caps in the face of U.S. dollar weakness.  And much more overvalued than large caps.  We have very little exposure to small or mid caps currently.  Risk works better early in Bull markets than late, because you are making money rather than losing it in declines!  It is called “beta.”  When you buy a stock like LinkedIn that shot up 10.69% on 2-6-2015, know that that “beta” means it can decline that or more (18.61%) on 5-1-2015.  We can’t avoid all such losses, but remember this and you will save yourself a lot of heartache: Risk up means risk down. 

GLD: Gold recovered from some recent weakness, but barely.  Not a good bet if the economy is indeed going to improve dramatically. If the economy remains sluggish, gold will do fine as rates resume their fall. 

TNX: The 10 Year Treasury hit the March high and fell, so the Bond Bulls may get some traction now.  Falling rates would help gold hang on. 

Emerging Markets:  I expect rates to fall for a bit (if not, stand this on its head), which emerging markets (EM) like.  They like loose, plentiful money lending.  I dialed back my China exposure (see Tweets/Twits) to 75% of my usual maximum exposure for EM with 70% in China and the rest in India.  I won’t like China if FXI closes back below the 4-17 low.  I’d like to see proof that the market really believes that the government is going to do something about getting the economy back on track.  Imports were down 16% this past reporting period, which is a sign of slowing.

Europe:  We saw a nice pop in our EWU position on Cameron’s re-election and the British economy is strong enough with a stronger currency now as well vs. the USD.  It’s not a great point to buy this market as it’s at a double top.  I don’t love chasing, but if you have to, this may be one that will work out.  It’s better to buy the pullbacks in Bull trends as we did with the U.S. market this week.

Stimulus by European, Chinese, Japanese, Australian, and other central banks certainly can help U.S. multinationals to grow, but the issue is whether that will be enough.  That’s yet another reason why we are focusing on buying pullbacks.

Now back to last week’s charts…..

Current Thinking and Market Timing:
– German rates rose rapidly this week (last week rates were negative out 8 years for Germany; this week rates are negative out to 5 years), indirectly pressuring U.S. rates.  Our market seems to believe that all is well and the Fed will continually raise rates, but the data does not clearly support that.  Rates are still very low in Europe, despite the move up this week, and the low rates should STILL help out the Eurozone economy.  So we’re staying put (see last week’s post).  If you buy into Europe, I would recommend hedging half of your holdings and not hedging the other as detailed in the prior post.

China (FXI): Looking toppy, so I removed leverage, which was previously as high as 50% near the top.  We still have 100% exposure to emerging markets mostly via China, but some via India.

– Last week I said: The dollar is looking toppy now (there is a “but” there….keep reading)…”  This week the dollar up trend was broken.  Where it inflects will depend on news flow.

The dollar is saying that the Fed WILL NOT raise rates that soon, or that as it does, inflation will get out of control.  Unfortunately, the dollar/rate signals are not crystal clear as rates are rising as the dollar falls, which one would expect only if A) The Fed were going to steadily raise rates until they hit 4-5% thereby crushing the economy or B) If inflation fears were rising and the Fed were in fact behind the curve as expressed in the bond market.  The data do not currently support the idea of rampant inflation.  The Fed appeared to be on track on the inflation front in 2014, but that fell apart in 2015 as the data here shows: Inflation Stats.

– The Fed cannot raise interest rates any time soon due to its two mandates.  Employment slowed last month, so next Friday’s number is key.  If U.S. employment is too strong, look for a sizable market correction.  Assuming employment remains sluggish, the Fed also has to meet it’s circa 2% inflation goal, which is it not being met. 

If you have not yet read the post on what normally happens to the markets when rates rise, please see that post link in the right column. 

If you like what you just read, please show your gratitude in a tangible way as many of you do, as in Tweeting the link to this article, writing a comment below that is meaningful, or writing a testimonial in the comments below about how you’ve made money based on my insights.  Thanks for taking the time to do that!

And now the charts for the week:

SP500 Index (SPX, SPY; click the chart to enlarge it): I said I expected the first two red lines to provide support this week and they did. If you look at the overall formation it is an ascending triangle, which is Bullish.  To capitalize on this, the market needs to quickly break out to a brand new high.

sp500-index-market-timing-chart-2015-05-01-close

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.

Russell 2000 U.S. Small Cap Chart (RUT, IWM; click the chart to enlarge it):  You can see the up trend break, and the relative underperformance vs. the large caps of late.  Small caps had risen in part based on their relative outperformance vs. large caps due to U.S. dollar strength, which hurts U.S. large cap multinationals more than small caps.  That influence is reversing now as mentioned (dollar down).

rut-small-cap-russell-2000-index-market-timing-chart-2015-05-01-close

Small caps are slipping. Held a support level. Another bounce and slip due?

The Gold ETF Chart (GLD; click to enlarge the chart): (see above and below for predictions): Real interest rates were rising last week with low inflation and rising rates, which always hurts gold.

gld-gold-etf-market-timing-chart-2015-05-01-close

Gold slipping once again despite dollar weakness on rising rates.

U.S. 10 Year Treasury Yield Index (Please Click the TNX Chart to enlarge it ; see related ETFs: TLT (a 20 year ETF), UBT (2X TLT and TBT inverse 2X TLT): Just when it looked as though rates could keep breaking lower, they reversed UP, but are just about to hit some resistance.  What will support a continuation of this?  A strengthening economy.  Rates will rise if the U.S. economy strengthens and creates more demand, which causing rising prices eventually.  Wages also rise in a healthy economy and stay ahead of inflation.  That is called prosperity, and it does not just touch the top 1%, when the economy is inventive and productive.

If the economy is in fact slowing, the Federal Reserve won’t be able to raise interest rates, and they are likely to fall with further easing measures or persistently low rates. 

tnx-10-year-treasury-note-market-timing-chart-2015-05-01-close

Rates rising again. A yo-yo under a Fed spell.

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 July 5th 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 4-17-2015 Close: Stocks Correct in Their Up Trend. Rates Are Falling. Gold is a Trade and Insurance.

A Market Timing Report based on the 4-17-2015 Close, published Sunday April 19th, 2015

UPDATE for the Big Markets We Follow Published 4-26-2015 (Update 2 on a subscriber email is below these comments…)

SP500 Index: stopped at 2117.69 on Friday, barely below the prior 2-24-2015 high of 2117.94.  This is a possible pivot point up or down and not a great place to buy.

Russell 2000: Stopped at 1267.54, just below the 3-27-2015 high of 1268.16.

Both large and small cap stocks are testing just below major highs.  This is a pivot point, so if you intend to trade it, follow the move, up or down.  I remain Bullish over the intermediate term of 6 months, because I expect the world economy to continue to strengthen and help the SP500’s  performance despite the U.S. dollar, so investors who don’t like trading may choose to stand pat and take their lumps should we shift into a correction.

As I messaged on Twitter®/Stocktwits® this week (see links below), sentiment remains supportive of a Bull case for the coming 6 months, because a large number of investors are neither Bullish nor Bearish (read at the link in the Tweet).  SPX earnings are beating ESTIMATES, but earnings are lower than the prior year’s Q1, and revenues are coming in light: Revenues light, earnings beat lowered expectations

That means the article at the prior link is a bit of baloney frankly.  Earnings FELL year over year and now they are beating LOWERED expectations.  The story sounds a lot different when you know the facts.
Multinationals remain challenged by the strong U.S. dollar.

Gold ETF (GLD): Broke the 113.41 low of 3-31-2015.  My view?  More downside to 111.95ish or prior March or November lows.  I still like GLD as insurance, but we’re not in a trade right now.

10 Year Treasury Yield: Back below 1.930%, so headed to test the base of the current range at 1.843%.  Bullish for bonds.

We’ve got both the Fed and GDP for Q1 2015 this Weds, so plenty of explosives on hand to send the stock markets higher or lower.

UPDATE 2 at 10:11 am 4-27-2015:  I received this note from Don and wanted to comment.  See my answers in bold/brackets.

Hi David,

I just wanted to write a quick note to thank you for your excellent insight and commentary on the markets. I’m a new subscriber (just received my first monthly newsletter a few weeks ago) and I’m really enjoying learning from your insights.  <Glad you find it valuable!>

I’ve noticed recently that a larger than normal number of “experts” on CNBC seem to be pulling back, anticipating a possibly substantial correction in the U.S. markets. <They are continually finding people who will be contrary to what the market is doing, because that is what makes for better TV, but not necessarily better investing.  Follow the key information on what is actually happening, rather than the latest opinion that is not based on facts, but just “worry.”   Worry will get you out of the market too soon in many cases, and keep you out when you should be back in. >  For that reason, I’ve been investing in DXJ, DXGE, and EWU, but I’m still overweight U.S. equities, mainly tech stocks. <Unless you are sure as to where the US dollar will go, I recommend that you balance dollar hedged vs. non-hedged ETFs.  If you are good at currency trading, by all means, pick one over the other. >My portfolio has done well, beating the S&P by about ten points<Fantastic results, hopefully in a tax-free setting of course if you are buying and selling a lot, or those gains get trimmed, but very well done regardless!>, but I’m wondering what you’d advise. I am a faithful reader of Investor’s Business Daily and so follow the tenets of William O’Neil by carefully watching the moves of the big institutional traders. IBD recently moved into a “Confirmed Uptrend” view of the markets based on institutional buying patterns<IBD is one of the better sources of information and perspective, though I don’t personally follow them at this time.  I do like Bill O’Neil’s book “How to Make Money in Stocks” but don’t use stops that are quite as rigid as he does.  I believe stops should vary with volatility.  Using the same % stop on every ETF/stock does not make sense in my view.>.

I do have a question for you: You say you’re bullish in the intermediate term, but are you neutral in the near term? I couldn’t determine your outlook by your comments in your most recent weekly update.<You actually just stated my view.  I’m short term neutral on the market (a pivot point is neutral really, not a place to buy or sell, but perhaps to hedge a bit of your gains if you know how to do that (see Tweet from this morning at link below or on sidebar of this site) or to take some profits and ride the rest, but I’m Bullish for the 6 month period for reasons that I’ve stated (why go too far ahead in time really?  It’s all guesswork and nonsense.  Even the Fed has no clue what the conditions will be in 6 months.  Their forecasts are notoriously bad.  My guess?  Economic conditions will not be that bad given all the monetary stimulus being supplied by central banks around the world.)

Thanks again for your wonderful newsletter. I’m an appreciative subscriber!

<Glad to have you on board as a “Loyal Reader”!  Keep sending your comments Don.  In the end, follow YOUR OWN conclusions, and you will do well, as you have.  Be flexible and willing to change your mind, but not too willing (over-trading most often results in lousy returns!).>

Kind regards,

Don Barton

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

back to last week’s charts and commentary….

I deliver extremely FOCUSED comments on the markets.  These are supplemented with “Tweets/StockTwits” (see links below).

Current Thinking and Market Timing:
– There are many who believe the Fed cannot raise rates until early 2016 now.
European rates are negative out many years (8 for Germany), so the pressure to invest in European stocks will be high for Europeans for a while to come.   This will pressure their stock markets higher.
– Stick with EWU if you own it.  It’s off it’s lows now.  Not a great buy here as it has run up from the recent low (you’ll have to buy a low in the up trend; we’re holding current positions).  It will benefit from the stronger European economy, and the pound should hold up better now.
For new European positions (in this case EuroZONE…), I’d buy Germany (see below for how to avoid currency exposure – unless you WANT some currency exposure!).
China just announced Sunday that they will allow banks to further cut reserves to bolster their economy that threatens to fall below the target of 7% growth. It’s the second cut in 2 months per @CNBCStick with FXI for now.  Decide where you’ll preserve profits of course, but don’t set an ultra tight stop.  I believe there was an overreaction on Friday to the announcement that the Chinese were going to allow more short selling in their markets.  The weakest hands fled the market.  Our hands are not weak, but we’re also not stupid, so we will apply some reasonable stop to preserve at least, say half our profits, correct?  It’s your decision, not mine.
The dollar is looking toppy now (there is a “but” there….keep reading) and with the Fed being put off potentially by several months if not much longer, the dollar could weaken further on the margin.  That’s why I’d hedge your European holdings with an equal amount of hedged vs. non-hedged ETFs (e.g. EWG plus DXGE).  That way, you don’t have to guess which way the Euro will go vs. the dollar.  If you are sure the Euro will fall to 0.85, then by all means overweight the hedged ETFs like HEDJ over VGK and DXGE over EWG for example.  Look at a chart of UUP, and you’ll see it’s on support, and if it holds there, the dollar up trend will remain intact.
Rates are falling again in the U.S.  See the chart below (TNX).  This makes stocks a good relative value over the intermediate term.
Longer term Treasuries will continue to rally (TLT, TYX). That’s the trend and the short term trend is also down in yield (TLT UP).  I admit that in the ultra-short term, we must break the current yield support (see chart) to continue the down trend on an immediate basis.  Stop buying into the BS sold to you by the mainstream press and read the truth about the “risk of rising rates” here: “What Actually Happens When Rates DO Rise…”
Gold is rising in a long term down trend.  Keep that in mind. You are now in a trade until the big trend changes.  (We are not in that trade, but I’ve commented that gold at least can be held as insurance and buying some would not be a bad idea if you hold zero currently.  Many advisors recommend 5% gold, but don’t say what the denominator is (investable assets [not including real estate] vs. all assets).  I say 5% of investable assets is reasonable.  Real estate is an inflation hedge at this point too, since it’s still fairly cheap, despite recent gains (not for all locations obviously; if something is overvalued due to speculation, it’s not a hedge).

Why am I not trading gold?  No great reason, other than the fact that the yield is zero and the fact that there are many complicating factors for gold not the least of which is the impending speeding up of the world’s economy, never great for gold unless inflation starts rising faster than interest rates (persistent negative real interest rates).  I think Chinese stocks are a better investment than gold right now (buy the pullbacks, not the “rips”).

If you like what you just read, please show your gratitude in a tangible way as many of you do, as in Tweeting the link to this article, writing a comment below that is meaningful, or writing a testimonial in the comments below about how you’ve made money based on my insights.  Thanks for taking the time to do that!

And now the charts for the week:

SP500 Index (SPX, SPY; click the chart to enlarge it): My sense is that the first two red lines will hold this pullback, but it really depends on earnings flow and forward guidance.  I don’t control that.  ; )

sp500-index-market-timing-chart-2015-04-17-close

Correction in Bull Trend

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.

Russell 2000 U.S. Small Cap Chart (RUT, IWM; click the chart to enlarge it):  Small caps will fall about twice as fast as large if the correction deepens.  That’s called “beta.”  You see in the chart below that the channel breakout to the upside failed TWICE.  This is a correction in an up trend though, so be ready to use some cash if we get a bigger pullback than we’ve already had.   Your first add could be at the 50 day moving average or slightly below that if we get there.

rut-small-cap-russell-2000-index-market-timing-chart-2015-04-17-close

Small caps correcting a bit as well in Bull Trend.

The Gold ETF Chart (GLD; click to enlarge the chart): (see above and below for predictions):  This “trade” is slightly above mid-range in the channel, but I’d use the red line for a stop if I were to enter here (see above for why I’m not bothering beyond “insurance” when it comes to gold).

gld-gold-etf-market-timing-chart-2015-04-17-close

Gold has formed at least a temporary low and is rising in its downward channel.

Please Click the TNX Chart to enlarge it (see related ETFs, TLT, UBT and TBT): The 10 year yield did in fact fall back below 19.30 as predicted.  We’re at support, and we need a break below support.  My guess?  It will happen this week, so we’re staying long TLT.

tnx-10-year-treasury-note-market-timing-chart-2015-04-17-close

Rates are still falling in their longer term down trend.

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 July. 5th 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 4-02-2015 Close: U.S. Employment Loses Steam. U.S. Stock Futures Fall.

A Market Timing Report based on the 4-02-2015 Close, published Saturday April 4th, 2015

UPDATE 4-13-2015: There will be no publication this weekend.  Celebrating “tax week” with the rest of you and re-accessing future offerings going forward.

MY CONCLUSIONS FROM LAST WEEK

Last week I said: “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 with a

Right.  The SP500 Index did rise a bit as shown in the chart below.

– stronger U.S. dollar

Right.  The U.S. dollar was up slightly.

– weaker gold

Wrong.  Gold was up fractionally.

– falling interest rates (rallying Treasuries and bonds).”

Right on TNX, the yield on the 10 Year Treasury, but wrong on TLT, which was down a bit.  TLT tracks longer maturity Treasuries (17.05 years per Morningstar)I think we’ll have further gains in TLT by Monday.

Why should we see a rising TLT and falling rates?  At 8:30 am on Friday we found out that only 126,000 jobs were created last month, far fewer than the 247,000 expected by Bloomberg.  That suggests that the Fed won’t be able to raise rates as early as expected.  It also suggests that stock prices may be too high.  U.S. futures fell about 1% after the announcement.  We’ll see where they open Monday. We could be in for a few rocky days.

Of note is that there is now room for the Fed inaction and stock futures still fell knowing that (futures were open, while the cash market was closed all day Friday), so it’s not all about the Fed any longer if we see selling continue over the next week.  Perhaps the economy will have to stand or fall on its own for the first time in years.  The Federal Reserve seems hell-bent on raising rates a bit, perhaps 25-50 basis points (0.25-0.50%) to get off zero rates.

Since the rest of the world’s growth seems to be improving marginally here and there (e.g. Eurozone, China and Korea), U.S. growth will be helped.  A further fall in U.S. Treasury rates will draw more money out of the U.S. dollar (down dollar), which would then help U.S. multinationals improve their sales.  The U.S. stock markets should recover in time despite a temporary setback in Q1.

And now the charts for the week:

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

sp500-index-market-timing-chart-2015-04-02-close

SP500 Index rallies a bit off the prior low.

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.

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

rut-small-cap-russell-2000-index-market-timing-chart-2015-04-02-close

Small caps still stronger than the SP500 Index.

The Gold ETF Chart (GLD; click to enlarge the chart): (see above and below for predictions)  Gold seems to have found a floor for the time being at least.

gld-gold-etf-market-timing-chart-2015-04-02-close

Gold holding up on Central Bank easing worldwide.

Please Click the TNX Chart to enlarge it (see related ETFs, TLT, UBT and TBT): The 10 year yield did in fact fall back below 19.30 as predicted.

tnx-10-year-treasury-note-market-timing-chart-2015-04-02-close

Rates will head lower.

CONCLUSIONS:  The rise of TLT will likely continue Monday.  Yields were falling after the 8:30 am announcement of the employment numbers.  Stocks may struggle for a few days or weeks depending on how poor forward guidance is during the upcoming earnings season.  Gold could keep some momentum with falling rates AND a falling U.S. dollar.  The U.S. dollar’s course is harder to predict than rates over of the next few months for reasons discussed in detail in last week’s post.  That means gold’s course could surprise us as well as it generally will move opposite the U.S. dollar as long as worldwide panic is not occurring.

For now, we’ll stay with U.S. stocks through the near-term bumps and with long term U.S. Treasuries (TLT).  We hold a standard 5% in gold long term as insurance, but have no trading position on and won’t until the dollar’s course has clearly shifted to the downside.

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 July. 5th 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 3-27-2015 Close: Lower U.S. Rates is the Best Bet Around (Updated 5-11-2015))

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®.

UPDATE 5-1 1-2015: Just 9 days ago, the 10 year Treasury was at a yield of 1.977% and now it’s at 2.269%, which is a BIG move to happen that quickly.  A close above 2.259% is a trend changer, but sometimes there are “fake-outs” just above resistance, so be careful not to switch teams too dramatically at these breakout points.  IF this new breakout in yields sticks, my “Best Buy Idea” will have been shot!

Let’s see how I did with…

MY CONCLUSIONS FROM LAST WEEK

PREDICTION for U.S. stocks: “Next stop for the SPX [SP500 index]?  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.  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