Market Timing Brief for the 12-12-2014 Close: Will the Market Dive Continue? Gold Rally Intact. Treasury Rally Solid.

A Market Timing Report based on the 12-12-2014 Close, published Saturday December 13, 2014

12-18-2014 UPDATE ON OIL STOCKS VS. OIL (XOI vs. XOIL [WTI OIL])

Note that oil is dropping much faster than the stocks.  That means one or the other must converge.  If you are buying oil stocks here, you need oil to rally very soon.

xoi-oil-stocks-vs-oil-catch-up-to-come-2014-12-18-close

Oil stocks OR oil will have to meet at some point again. My guess? Oil will decline some more and drag down oil stocks.

12-16-2014 UPDATE ON SMALL CAP CHART (RUT, IWM):

rut-small-cap-russell-2000-index-market-timing-chart-2014-12-16-close

Small caps seek support.

And now for this past week’s issue:

The SP500 Index will fall to about 1908-1950ish if this level of support does not hold.  Monday could bring one more “flush” lower followed by a bounce.  That final bit of selling dislodges those that see the 50 day “moving monkey average” as some disdainfully call it as a hugely important support level.  Markets almost always test at least a bit below important support and any attempt to set tight stops around them most often fails.  I was correct that the small cap weakness I saw and reported to you last week predicted the doom of the large cap rally.

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

sp500-index-market-timing-chart-2014-12-12-close

Where Will the Pullback Stop?

I am not showing the chart this week, but it turned out that the resistance level I plotted (see last week’s post) for the Chinese ETF FXI did hold back a further rally. 

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.

What about small caps?  They failed at the same resistance level they tested  three times.  The only support below the yellow up trend line and 200 day moving average is the 50 day moving average.  If the small caps break support, watch for the SP500 Index to break as well.

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

rut-small-cap-russell-2000-index-market-timing-chart-2014-12-12-close

Small cap stocks fail where they were expected to fail.

Gold is still rallying.  What’s very encouraging is the increase in volume with each price increase.  Lower and lower rates are good for gold, because there is still some inflation and if rates head lower much faster than the world deflates, real interest rates can turn negative.  There is nothing better than that for gold and other precious metal pricing.

What’s the risk?  The opposite.  If rates move up because the U.S. Fed raises rates in March let’s say, that would help to ward off inflation while raising returns resulting in positive real interest rates, bad for gold.  Remember gold makes us nothing.  The other factor that could help would be having the dollar weaken and it has been doing so.  Still, it’s hard to see how the dollar could become that weak giving how moribund the Eurozone and Japanese economies are.

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

gld-gold-etf-market-timing-chart-2014-12-12-close

Gold Rally is Intact

The 10 Year Treasury interest rate (TNX, tracked by TLT if Bullish; TBT if Bearish): Rates are indeed plumbing the prior lows which was my original thesis.  Despite that, I exited prematurely it turns out, but I think there is risk now with the Fed statement coming out this next week on Wednesday followed by a live news conference.  Dr. Yellen has an opportunity to speak a lot, which could get her and the markets in trouble.  The world is slowing dramatically, which gives her cover though.  If she fails to take cover, however, rates will rise fast and TLT will sell off hard.

Please Click the TNX Chart to enlarge it:

tnx-10-year-treasury-note-market-timing-chart-2014-12-12-close

Rates fall, but will they re-bottom completely?

Note that the newsletter is now closed to new subscriptions, but you can join the wait list for Loyal Subscribers Only: Join the Wait List to Join the Newsletter as a Loyal Subscriber, Opening Just Before January 1, 2015 for a few days.  If you join and don’t read the newsletter, you will be deleted.  Sorry, but 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 © 2014 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 12-05-2014 Close: Employment Numbers Contradict Bear Thesis But Will the Employment Surge Continue? Stocks Stagnate and Gold Firms With Rates At Higher Low

A Market Timing Report based on the 12-05-2014 Close, published Sunday December 7th, 2014

The SP500 Index rose 0.17% after the employment number came in at 321,000, much hotter than expected.  The market has not discounted that figure, so good news could be seen for what it is, as good news, after some digestion of the news.  The other point of view is that the Fed must now raise rates as soon as March, so one should sell stocks ahead of rising rates (I don’t see this happening soon, due to the slowing around the globe).  You should also know that although a rate increase could frazzle the market for a bit, rate increases that are associated with stronger economic growth lead to HIGHER stock prices eventually.  That’s historically proven.

There is nothing the market loved more in the late 1990’s than employment numbers that were strong month after month.  It is not clear that the employment surge is sustainable against the backdrop of falling oil prices (and falling employment in the oil fracking industry) and slowing around the globe.  However, there is enough room above for a further rally of a few percent in the SP500 now that we are about mid-channel for the SP500 Index as the chart shows.  The Bull minus Bear percentage spread of individual investors at AAII.com fell from 31.4% to 16.7%.  That is not the sentiment move you want to see if you are Bearish.  You want investors cheering and throwing hats into the air at the tops, so this is clearly not the ultimate top for the market in sentiment terms.  At the same time, that does not mean the market cannot retrace a bit.  It means that the retracement should be bought, and we should be fully invested at or near these levels.

Admittedly, I am a bit more invested abroad including in China than in the U.S., because China’s growth prospects continue to be better even though they have slowed.  Chinese stocks are being opened up to the rest of the world whereas the A shares were a closed game before (watch the premium vs. discount when you buy; don’t buy the ETF’s if they are too rich in premium; and some are illiquid so watch the spreads too).

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

sp500-index-market-timing-chart-2014-12-05-close

SP500 is about mid-channel now.

FXI, Market timing Chinese Stocks (click to enlarge):

fxi-market-timing-chart-weekly-2014-12-05-close

Chinese stocks still have some room and could break out to new highs vs. past 4 years.

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.

What about small caps?  They are failing to move to new highs, even as the SPX does so.  This is a warning sign about buying the overall market at these levels.  I’d rather buy some individual stocks that have been knocked down for reasons other than the market itself, and we did just that last week (see Twitter stream).  I would not touch U.S. small caps at these valuations and given this chart:

The U.S. Small Caps (RUT, IWM):  Russell 2000 U.S. Small Cap Chart (click the chart to enlarge it):  You can see RSI, relative strength, moving down as the index tops.  Looks ready to fall again.  Only a new high above the two rightmost arrows could fix that.

rut-small-cap-russell-2000-index-market-timing-chart-2014-12-05-close

Small caps fail to break out.

 

The Gold ETF Chart (GLD; click to enlarge the chart): Last week gold firmed up finally.  As I published on 12-01, GLD has seen increases in volume with each thrust up, but needs to move through the 50 day moving average soon or this rally could die right here.  Spot gold played briefly with 1200 and is now back below that level.

gld-gold-etf-market-timing-chart-2014-12-05-close

Gold firms up. But must thrust upward once again to overcome 50 day moving average.

The 10 Year Treasury interest rate (TNX, tracked by TLT if Bullish; TBT if Bearish): TLT was working for a bit, but I grew concerned when I saw the negative reaction to the employment numbers, so we exited the trade at a small profit.  High employment would mean the Fed stands aside and raises interest rates eventually, which will cause major losses in the bond market next year if it happens.  Some say there is NO WAY that can happen as long as the rest of the world is either tipping into recession (Europe almost in recession, with parts like Italy firmly in recession and Japan in recession) or slowing (China and to some extent India as well; both are growing, but more slowly than before).  If more signs of worldwide slowing are seen, rates will likely fall once again.  I think the world scene could keep rates range bound for now.  They will fail as an “investment” over the next few years is my guess and also that of Warren Buffett, who runs quite a bit of insurance business and whose job it is to keep track of interest rates and their relative return vs. inflation.  The bond Bulls may still have a year or two left in this trade, but the risk has gone up substantially that investments in long term bonds will fail.

Please Click the TNX Chart to enlarge it:

tnx-10-year-treasury-note-market-timing-chart-2014-12-05-close

10 Year U.S. Treasury makes a higher low?

I consider Treasuries a TRADE, NOT an INVESTMENT at these interest rate levels as they are unsustainable over long periods of time unless our economy never recovers its former strength.  The bet is also a bet on the U.S. dollar as it’s an obvious, safe way to hold U.S. dollars.  Safe when rates are steady and even better when rates are falling.  Holding dollars as Treasuries when rates are rising stinks.

Eventually, U.S. Treasuries won’t be sought after and rates will rise rather than fall as they have over the past year, if our economy slows dramatically AND we are no longer THE safe haven in the world.  I admit that this new scenario would take much more time to play out.

Our ability to pay out debt and the strength of the U.S. dollar is firmly linked to the strength of our economy as it is for every country.  Over the short term, U.S. dollars may be sought if we remain a relatively safe bet vs. the rest of the world, but over the longer term, we will have to deal with China as the leading economy of the world.  They have just surpassed the U.S. as the leading economy: China’s Economy Now Larger Than U.S. Economy  You must consider being invested outside the U.S. to access the growth to come as well as having currency protection.  It could take a decade or two for China to fully develop their capital structures, but the Chinese currency, the yuan, will be a dominant currency eventually, and that will pressure U.S. rates as the yuan becomes a new safe haven.

SUMMARY: U.S. small caps have NOT made that new high that is needed, so I still expect a pullback in U.S. stocks, but it could come in January rather than this month.  Mild corrections sometimes do happen in December.  We have no allocation to small caps in the U.S.  Sentiment says this is not the final high.   There is still room above for the SP500 to rally as shown on the chart above.  I think that further rally could happen before year end and then perhaps we pull back in January.

An outside event could also induce a correction earlier.  Right now, things look good for the U.S. and the U.S. dollar keeps rising, making U.S. stocks a safe haven for foreigners.  Gold must rally soon or it will die at the 50 day moving average.   Rates should move up a bit now against the backdrop of very strong employment and even income figures, which we have not seen much of previously, so we’ll stand clear of TLT for now.

We are diversified across the dominant economies in terms of economic growth: the U.S., the U.K. (which has underperformed due to the drag of Europe on it), China, and India.

Note that the newsletter is now closed to new subscriptions, but you can join the wait list for Loyal Subscribers Only: Join the Wait List to Join the Newsletter as a Loyal Subscriber, Opening Just Before January 1, 2015 for a few days.  If you join and don’t read the newsletter, you will be deleted.  Sorry, but 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 © 2014 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 11-28-2014 Close: SP500 Index Top with Small Caps Leading Down? Will Gold Hold the Channel? Rates Plummet Again.

A Market Timing Report based on the 11-28-2014 Close, published Sunday November 29th, 2014

12-01-2014 Close: The gold rally after capitulation selling in the overseas market last night looks real today.  Volume is increasing with price as you see in the chart below (click to enlarge the chart; NOTE ON CHART SHOULD READ 12-01-2014!):

gld-gold-etf-market-timing-chart-2014-12-01-close

No guarantees, but this rally is looking real due to the rising volume on up days.

…continuing now with this week’s issue published 11-29-2014:

The SP500 Index faltered a bit on Friday and the Russell 2000 Index actually retopped at a lower high and began to fall.  Markets can go up a long time in a grinding fashion, but there are some limits based on expectations of the strength of the world economy.  Could the SP500 simply move higher?  Yes, up to the yellow channel line in the chart below.  The question on Monday will be whether sales were strong enough to get us to a happy Q4 GDP.  My hypothesis, which may not hold true, is that the Russell 2000 Index must make a new recent high before the SPX hits the top of the channel.

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

sp500-index-market-timing-chart-2014-11-28-close

Will it make it to the top yellow channel line or fall with the small caps?

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

rut-small-cap-russell-2000-index-market-timing-chart-2014-11-28-close

Small caps are falling already.

The AAII sentiment Bull – Bear Spread is 31.3% this week up from 25.3% last week.  If you have not seen the possible outcomes given this sentiment level, you can read it here: AAII Survey Says!

To find out what I’m going, 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.

The Gold ETF Chart (GLD; click to enlarge the chart): Gold fell due to one major event, namely, the OPEC decision to allow oil prices to tank further.  This may seem good short term for U.S. consumers, but their intention is clearly to put oil shale businesses out of business in the U.S. and some speculate to hurt the Russians and Iranians as well who are supportive of Syria’s Assad.  It hurts U.S. employment in the energy industry.  Lower oil prices also mean lower prices for many goods, and hence deflation, which is not what the world needs right now according to every Central Banker who breathes oxygen.  They want growth with mild inflation.

Gold needs to hold the lower end of the channel.

The 10 Year Treasury interest rate (TNX, tracked by TLT if Bullish; TBT if Bearish): I was correct about rates falling sharply again.  They did just that as oil and gold fell as the chart shows and we’re making money on TLT.

Please Click the TNX Chart to enlarge it:

tnx-10-year-treasury-note-market-timing-chart-2014-11-28-close

Rates plummeting again.

SUMMARY: Small caps have topped a 3rd time.  If they can recover and bounce to new recent highs, the SPX will have a shot at the top channel line shown above.  If not, expect at least a mild pullback in U.S. stocks. Gold must hold the lower trend line or the damage could continue to new lows even below the bottom red line. 

Rates are falling and probably will retest the last low as I predicted weeks ago.  It makes sense in the face of deflation that rates must fall.  We have deflationary pressures despite massive money printing operations worldwide.  Will more money printing fix this?  Doubt it.  Be prepared with an investment plan when things go south.

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.

Note that the newsletter is now closed to new subscriptions, but you can join the wait list for Loyal Subscribers Only: Join the Wait List to Join the Newsletter as a Loyal Subscriber, Opening On January 1.2015 for a few days.  If you join and don’t read the newsletter, you will be deleted.  Sorry, but 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.

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 © 2014 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 11-14-2014 Close – UPDATED 11-23-2014: SP500 Index NOW AT NEW All Time High. Small Caps Failing to Rally. Gold Looking for a Bottom as Rates Ready Their Collapse.

A Market Timing Report based on the 11-14-2014 Close, published Sunday November 16, 2014

Updated on 11-23-2014: New charts are posted below each chart below for comparison.  The SPX is at new highs and has room to move up further based on Bollinger bands, but is a bit stretched on the basis of RSI.  Realize that rallies can occur even when RSI has peaked.  When RSI falls as the market rises, it is much more telling.  Note the upper yellow channel line on the chart below as well.  The SPX could rise all the way to the top of the channel from here without pausing.

Small cap stocks issued another note of caution this week, failing to make new highs with the SPX.  That shows that small cap stocks are out of balance with large cap stocks, and if they were to make a higher high now above the two lower highs shown in the chart below, that would signal more gains for the SPX as well.

Gold is back above critical support.  At times, these sorts of tests fail, so we’ll have to wait for further upside confirmation.  Attempting to predict whether inflation or deflation will occur over the next few years is a tough exercise. It is probably a better idea to follow the price of gold.

Rates have been moving sideways, and my guess is that they will retest the prior low in yield.  The impact of Central Bank action won’t be immediate, which should keep rates low for a while.  But the market needs to verify this impression.  Yields now need to fall below 2.305% for a retest lower to occur.

The SP500 Index rally to new highs has not been accompanied by an equal rally in the small cap stocks.  This is called “bad breadth.”  The market is being powered forward by just a few stocks like Apple (AAPL) compared to the entire universe of stocks that could be rallying together and have not continued to do so.  In addition, what goes up very fast often needs to correct, and I believe that about to happen.  It would be extremely unusual to get a V bottom after a sell-off of the magnitude we had in mid-October.  Bulls argue that the market, even though richer than it was last year, is still the only game in town for investors.  The risk has gone up on that bet however.  Risk rises whenever markets get ahead of themselves and then seek to revert to the mean.  Note the top being formed after two decelerations.

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

sp500-index-market-timing-chart-2014-11-14-close

A Stretched Market Just Made a New High

NEW CHART:

sp500-index-market-timing-chart-2014-11-21-close

SP500 Index making new highs still.

This week was marked by about the same spread between Bulls minus Bears with Bears increasing while Bulls increased just slightly more than the Bears.  There are still a lot of Bulls at the moment, despite those converts, so my prior take on sentiment still holds: AAII Survey Says!

To find out what I’m going, 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.

The U.S. Small Caps (RUT, IWM):  Russell 2000 U.S. Small Cap Chart (click the chart to enlarge it): Just as last week, the small caps are lagging despite a bit more progress this week as the chart shows below.  They have formed what is called a double two wave up, which can lead to an even bigger third wave down in Fibonacci terms.  Alternatively, they could simply float down into the prior range without taking out the prior lows.   Remember that the last low was in fact a lower low, so there is room to form a still lower low that would correspond to that 3rd wave down.

rut-small-cap-russell-2000-index-market-timing-chart-2014-11-14-close

Small Caps Still Lagging, Not Reaching New Highs

NEW CHART:

rut-small-cap-russell-2000-index-market-timing-chart-2014-11-21-close

Small caps failed again.

Gold failed at support and started a bounce and then decided to backtest in a very harsh way, but it survived and bounced even more.  GLD is now above the 10-03-2014 low of 114.42, closing at 144.47 on Friday.  This may inspire the gold Bulls to buy even more this week.  The dollar index failed a breakout last Friday and if it continues to correct, gold will fly UPWARD.

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

gld-gold-etf-market-timing-chart-2014-11-14-close

Gold finding a bottom?

NEW CHART:

gld-gold-etf-market-timing-chart-2014-11-21-close

Gold is now back above previously broken support.

The 10 Year Treasury interest rate (TNX, tracked by TLT if Bullish; TBT if Bearish [note that it’s a 2X ETF while TLT is 1X]): The 10 Year Yield has been trading at what looks like a temporary high and is primed to retest that prior low shown in the chart.  If it doesn’t, it must break above around 2.400%, which should not happen given the slowing around the world.  Remember that falling oil prices are partially supply related but are also demand related due to the slowdown in the world’s economies.  Both are deflationary pressures in economic terms.

Please Click the TNX Chart to enlarge it:

tnx-10-year-treasury-note-market-timing-chart-2014-11-14-close

Time to Add to Bonds and Treasuries Again?

NEW CHART:

tnx-10-year-treasury-note-market-timing-chart-2014-11-21-close

Are rates about to head down for a retest of the prior yield low?

In summary, I favor a corrective move lower in U.S. stocks that may have already begun for U.S. small caps.  If small caps make news highs above current overhead resistance (see chart above), that scenario will be voided for now, and we’ll see big caps continue upward as well.  You cannot have a game plan that only considers one possible direction.  That’s called being a “perma-whatever,” and we are not that around here. Gold looks primed to rally further, and is supported by low to negative real interest rates around the world.  The risk from the way we’ve seen gold trade of late is that it has fallen in the face of rising deflationary pressure.  If those pressures persist, despite central bank action, gold prices could fall.  Rates look ready to move lower now, which is why I loaded up more TLT last week, which rallies when Treasury yields fall.

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.

Note that the newsletter is now closed to new subscriptions, but may be re-opened in the future.  Stay tuned here in the meantime and follow all the action via the Twitter® and StockTwits® links above.

Copyright © 2014 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 11-07-2014 Close: SP500 Index Testing Brand New Highs. Gold Bounces After Serious Break. Rates Top Out for Now?

A Market Timing Report based on the 11-07-2014 Close, published Sunday November 9th, 2014

The SP500 Index has blasted upward from the prior low, a bit too quickly perhaps, but the Republican win of the Senate just made the market go up a little bit more.  You’ll note in the chart below that the rate of upward movement has decelerated however, and I believe a pullback could be imminent.  IF on the other hand the market keeps moving up, we’ll be adding to positions.  Why?  There are a lot of Bulls at the moment, and here is what investor sentiment is saying about that: : AAII Survey Says!

To find out what I’m going, 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.

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

sp500-index-market-timing-chart-2014-11-07-close

SP500 rate of rise is slowing.

The U.S. Small Caps (RUT, IWM):  Russell 2000 U.S. Small Cap Chart (click the chart to enlarge it): The small caps are NOT coming along for the ride to new highs.  They are stuck, as shown below.  This is what we call a negative divergence.

rut-small-cap-russell-2000-index-market-timing-chart-2014-11-07-close

U.S. Small Caps are NOT Coming Along for the Ride to New Highs

Gold failed at support and started a bounce back on Friday most of which happened after I pointed it out on StockTwits® and Twitter® (see links above).  The bounce was up to a prior resistance level, so more is needed or the shorts could just drive down gold again this week.  If stocks sell off and rates fall this week, gold could move up past this block.

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

gld-gold-etf-market-timing-chart-2014-11-07-close

Gold is bouncing from a dangerous break on the chart.

The 10 Year Treasury interest rate (TNX, tracked by TLT if Bullish; TBT if Bearish): Rates look like they may have peaked again.  I believe they could retest the prior lows if not exceed them to the downside (remember when rates fall, TNX falls and Treasuries rally in price).

Please Click the TNX Chart to enlarge it:

tnx-10-year-treasury-note-market-timing-chart-2014-11-07-close

Rates hit the 50 day moving average and declined. More to come?

In summary, I suspect we may see a pullback in the SP500 soon along with a fall in the already stalling small cap stocks.  Gold may rise further as interest rates fall from their recent high.  Rates cannot be going up in the context of a deflating world.  That would work against the Fed Reserve’s mandate and drive the U.S. economy into a recession.

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.

Note that the newsletter is now closed to new subscriptions, but may be re-opened in the future.  Stay tuned here in the meantime and follow all the action via the Twitter® and StockTwits® links above.

Copyright © 2014 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 10-31-2014 Close: Markets Get Latest Monetary Cocaine Fix via Japan. The U.S. Will Now Import Deflation.

A Market Timing Report based on the 10-31-2014 Close, published Sunday November 2, 2014

The SP500 Index has risen off a V bottom and has yet to retest lower.
This week it was Japan that provided the funny money for the worldwide rally to continue by pursuing an easy money policy.  At least until the economic recovery falters.  We are invested 95% long but are watching the exit.  Remember as I Tweeted this week, cheap Japanese goods are NOT good for U.S. multinationals.  That makes us less competitive, which means lower sales and even lower profits due to the need to lower pricing in U.S. dollar terms to keep up with the Japanese devaluation.  When Japan prints money, the U.S. imports DEFLATION, which means falling U.S. corporate earnings.  It helps U.S. consumers, but hurts pricing and profits.

To find out what I’m going, 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.

SP500 Index (SPX, SPY; click the chart to enlarge it): We’re back to the top!  Things are stretched for sure and even a mild pullback would be healthy even if it’s just to the 50 day moving average (or just below to scare out a few more weak hands).  ISM manufacturing index is out tomorrow at 10 am ET.  That could motivate the market to choose its next move.  There is plenty of room for a pullback now.  Even if we get yet another high, we may see a retest after that.

sp500-index-market-timing-chart-2014-10-31-close

Will the V bottom be tested?

Sentiment stayed at a persistently positive moving from a Bull minus Bear percentage spread of 27.2% to 28.3%. See the NEW UPDATE HERE: AAII Survey Says!  (IT WAS UPDATED again on 11-06-2014!)

The U.S. Small Caps (RUT, IWM):  Russell 2000 U.S. Small Cap Chart (click the chart to enlarge it): See the potential island reversal set-up in the chart below?  An island reversal means there is a gap up, then a gap down, so a price “island” is left hanging in the “air.”

rut-small-cap-russell-2000-index-market-timing-chart-2014-10-31-close

Above the down trend line, but a bit too much too soon.

Gold failed at support and is in danger of a further drop.  Because there is rising deflation now, real interest rates are rising, not falling and that hurts gold.  Money printing should help it, but only in the currencies being printed.  If the Fed does not rejoin the money printing game along with the ECB, Japan, and China, gold will go up in terms of each of those currencies and by the sheer demand increase gold prices could be somewhat supported.  But a stronger dollar brings gold prices down in the U.S. and leads to more selling here.  That is the balance being struck and the result is the spot price.  For now, dollar strength is winning over gold purchases in the rest of the world.  (see my website for a further explanation of gold pricing in various currencies here: Gold Priced in Currencies).

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

gld-gold-etf-market-timing-chart-2014-10-31-close

Gold broke major support.

The 10 Year Treasury interest rate (TNX, tracked by TLT if Bullish; TBT if Bearish): rates are testing above what was resistance.  Rates cannot rise too high when the rest of the world is printing money.  If they do, the dollar will crush U.S. corporate earnings. 

Please Click the TNX Chart to enlarge it:

tnx-10-year-treasury-note-market-timing-chart-2014-10-31-close

The 10 Year Treasury Yield rose above nearby resistance after the Fed statement.

What would be the perfect Bearish scenario?  If gold reverses UP hard with a falling U.S. dollar and falling Treasury yields, and the stock market falls from Friday’s highs.  That would produce island reversals in many indices simultaneously and be very Bearish short term.

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.

Note that the newsletter is now closed to new subscriptions, but may be re-opened in the future.  Stay tuned here in the meantime and follow all the action via the Twitter® and StockTwits® links above.

Copyright © 2014 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 10-24-2014 Close: Market Stories. Will the Rally Continue or Was That It? Gold Eases. Rates Back Up a Bit.

A Market Timing Report based on the 10-24-2014 Close, published Sunday October 26th, 2014

The SP500 Index bottomed and came up to form what is called a V bottom.  Now there are many stories that will be told about how “We must retest the low!” and “That was it!  We’re home free through next April!” and on and on.  We conscious investors do not care what “they think.”  We see what we see now and in the past and act on it as best we can.  I can say there is a risk of a retest based on general market dynamics.   Yes, that is one of those stories!  The story goes that a certain level of healing is needed after a period of volatility.  Retests are simply the market building its confidence in the general level of stocks we are at.  When retests occur and hold the base, markets like that, and prices rise again.  But this requires lower prices unfortunately!

There is still another Bearish story: The markets are rising on declining volume.  See the chart below to appreciate this for the SP500.  But do note that the volume is higher now than during the rise from the August low.  Volatility is higher too, which could explain some or all of that however, so the decline in volume should be respected.

Is it advisable to have ANY cash at this point?  That is a matter of your own risk management process.  Our conservative portfolio has more and our aggressive portfolio less (85% vs. 95% invested in equities worldwide, respectively).  I added back several individual stocks, which lower my risk over buying the entire market in my opinion, because I buy the companies that are still performing well and are likely to do so for months to come at a minimum.  Can you really see farther ahead than that, other than having a certain confidence that a company’s management has a system and plan for making progress going forward?

Do NOT hold cash if you believe: 1. The worldwide economy has bottomed and will heal steadily now.  Europe and China will not drag us down, because they are going to ease too.  2. All the risks are taken care of now, including ISIL, Ukraine, Eurobanking system, and Ebola.  3. The elections won’t shift the power balance in Washington and make it lopsided.

To find out what I’m going, 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.

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

sp500-index-market-timing-chart-2014-10-24-close

SP500 Index Rising from a V Bottom

The week before this past week I discovered that the rise in sentiment was actually Bullish as I wrote here: AAII Survey Says!  This week the spread moved up from 9.0% to 27.2%, which is quite high.  If this sentiment shift is like the last two similar ones in June and August, we are due for a higher high either now (as in June) or after a mild easing back of the market (as in Aug.) followed by a pullback that then wipes out all the gains and then some.  The biggest Bull trap would be to rise quickly to 1985 or a bit higher and then wipe out ALL the gains from the prior low.  I am not saying that is what will happen.  I am saying that from the standpoint of sentiment, we should have SOME cash on hand to take advantage of lower prices.  Should you hold some cash?  That you’ll have to decide for yourself.  

Remember that this is just ONE parameter and sentiment is sometimes dead wrong, especially with the Fed and ECB splashing more money onto the fireThe Fed meeting is this Weds. and if they indicate more dovishness, it could be a very merry Christmas for Wall Street.  On the other hand, if they are as hawkish as they’ve been, watch out below. 

The U.S. Small Caps (RUT, IWM):  They are bouncing, yes, but toward what’s called a “Death Cross,” where the 50 day moving average slices down through the 200 day moving average.  Small cap stocks sell off harder in a correction or Bear market because they are less liquid (not to mention, more overvalued still), and they come down faster as investors decide they should not buy any more of them and then the few sellers have smaller and smaller numbers of investors to sell to.  That is how any market can drop even 7.5% in a day as happened even with the SP500 back in 2008.  With the RUT, the losses were up to 9.47% in a single day.

When there are NO buyers, stocks can drop precipitously as was demonstrated during the Flash Crash back on 5-06-2010.  That has supposedly been fixed, but it’s why putting a stop loss sell order into the market can result in major losses.  I use stop limit orders, not sell stop orders, when I need to protect gains, even though some advisors will say you should not use them either.  I disagree even though stop limit orders are not perfect either.  Gaps down can prevent your shares from being sold if news suddenly hits the market.

What we don’t want to see is the small caps dropping right from the 50 day moving average.  And we don’t want to see it for the large caps either and we are even closer to the 50 day mav for the SPX.

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

rut-small-cap-russell-2000-index-market-timing-chart-2014-10-24-close

U.S. Small Caps Bounce Toward the “Death Cross”

Gold has eased back as rates backed up a bit (oddly enough from the 50 day moving average!), but the drop is not sustainable in my opinion.  Why?  Because the Fed is going to get on the case and delay raising rates even longer.  There could even be QE4.  That’s not clear yet.  The economy is not in recession by any means, but growth has slowed and even more so in the European economy.  Russia has just made it all that much worse.  ISIL fears don’t help either.  Ebola is another issue that certainly does not instill confidence.  Since rates will stay low for a long time, gold will do fine.  It should at least retain its value.  If the market shows us otherwise, it will sink much farther below 1200 than it did during the last drop.  For now, I believe you can buy the gold pullbacks. 

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

gld-gold-etf-market-timing-chart-2014-10-24-close

Gold Eases as SP500 Rises

The 10 Year Treasury interest rate (TNX, tracked by TLT if Bullish; TBT if Bearish) has run up a bit, but I believe that should be about it.  I think our entry point on Twitter/StockTwits was a day or two early, which is fine.  We cannot expect to take positions at the exact bottoms or leave them at the exact tops.  Want to know a secret?  When a market dives to a certain level and then rebounds rapidly a retest is even more likely than if it takes a long time to recover.  A slow recovery is much more healthy than what we’ve seen.  That’s why the stock market gains are at risk and why U.S. Treasuries could be just what the doctor ordered for a hedge against stocks.  The Fed will command the markets next Wednesday with their FOMC announcement.

Please Click the TNX Chart to enlarge it:

tnx-10-year-treasury-note-market-timing-chart-2014-10-24-close

Rates Rise a Bit But Not for Long

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.

Note that the newsletter is now closed to new subscriptions, but may be re-opened in the future.  Stay tuned here in the meantime and follow all the action via the Twitter® and StockTwits® links above.

Copyright © 2014 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