Market Timing Brief for the 2-05-2016 Close: Stock Market Rally Hesitates. Gold Rally Solid. Rates Signal Fed Must Pause.

A Market Timing Report based on the 2-05-2016 Close, published Sunday February 7th, 2016

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

1.  SP500 Index: Last week I coined a term: “SENTIMENT SHOCK,” a term that could define the next few months in the market and the occurrence of a Bear market in the SP500 Index (read the report: HERE) The first one just occurred recently between the two AAII.com Individual Investor Sentiment reports from 1-13-2016 to 1-20-2016.  We are now waiting for the second one.  

I had a Twitter interaction with Jim Cramer this week about the definition of a Bear Market HERE.  I have no disagreement with what he said.  His feeling is that this is a “rolling Bear market” in that various sectors and indices are rolling over into Bears one after another.  I’ve noted small caps and biotech are in Bear markets already, while the SP500 Index isn’t.  My point was simply to say it is important to define which markets are in Bear states and which are not.  Why?  Because the investing and trading strategy is completely different in a Bull vs. Bear Market. 

In a Bull market you just buy every dip and ride the market up. In a Bear market, if you buy a dip you must sell the bounce to make any money as we’ve been doing; otherwise, you are simply racking up more and more losses as new lows are set.  If you short stocks, then during a Bear you short every rally and build your short position on the way down OR you can short the rallies and cover every dip, rinse and repeat.  The latter is safer because rallies during Bear markets can be very strong.

The fact that the market pulled back strongly on Friday COULD result in the second “Sentiment Shock” IF it is combined with a further sell-off early this week.  I don’t run this market, so I cannot tell you if the selling has a chance to stop at the now obvious support range of 1867-1871.91.  If it fails there, the further damage to the market could be extensive. The market COULD retest the October low and then resume a bounce, but I would not be overly optimistic if the 1867-1872 level does not hold.  For now, we’re in this for a bounce, and I will change my view when the market does.  We observe and respond to the market; we don’t argue with the market.  I will drop my exposure level if the market breaks down again (continued below the chart…).

sp500-index-market-timing-chart-sentiment-shocks-2016-02-05-close

The rally is weakened.

The fact that the small caps failed to climb above 1040 this week represents an important failure, but let’s review the small cap chart now…

Keep up to date at Twitter and StockTwits: See my messages on Twitter® Follow Me on Twitter®.   Follow Me on StockTwits®).

2. U.S. Small caps failed to scale 1040, but did not make a brand new low.  I would look to the SP500 Index to decide if a further bounce will continue, but I would also expect that any move of small caps below 983.98 must be quickly reversed to avoid a much greater market failure.

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

rut-small cap-index-market-timing-chart-2016-02-05-close

Small caps are in a Bear market.

3. Gold is continuing it’s rally and if you heeded my advice to “Buy some damn gold” if you owned none, then you have profited.  Preserve at least part of those profits.  Gold profits can be fleeting and continued progress for gold will be directly related to how bad the economy gets and therefore how much the Federal Reserve feels it must indirectly degrade the U.S. dollar’s strength.  That’s how they can be sure we can eventually pay our bills -through inflation.  They don’t like to talk about the dollar, but they directly influence the dollar despite their protestations.  If they raise rates, they will drive the dollar UP and pressure gold.  I don’t expect they’ll be able to do that at their next meeting, but the Fed does not always do the right thing.  Raising rates in a deflationary environment around the world was the wrong thing as I explained last week.

Buy the dips rather than chase the rallies if you are not yet invested in gold, but set a mental stop and cut your losses should the trend change.  Go back to the gold charts in 2001-2004 to see how erratically the gold price can move during a large Bullish overall move.  There are a lot of givebacks of each step up, some of at least 50% of the given step up.

Gold ETF (click chart to enlarge; GLD):

gld-gold-etf-market-timing-chart-2016-02-05-close

Gold rally continues. Preserve profits, but allow some wiggle room.

4. U.S. 10 Year Treasury Note Yield (click chart to enlarge; TNX,TYX,TLT,TBF):  I said last week: “A fall below that 1.905% base would be a further danger sign about the U.S. economy.  Low rates help the economy, but could indicate an upcoming recession…” Rates in fact did fall below 1.905% this week and could fall further.  The Fed may have to make some bolder statements to drive a fall to the prior low of 1.651%. (continued below chart).

tnx-10-year-treasury-note-market-timing-chart-2016-02-05-close

Rates fall below the prior range.

Eventually rate will rise, because the economy will recover, but that could take some time.  I still expect rates to remain fairly low for several years unless the current policies lead to stagflation where there is both slow growth and inflationIn that case, we could see rising rates, falling stocks in real inflation-adjusted terms (stocks can rise and the gains be eaten up by inflation in real terms whereas the stock market is higher numerically), and rising gold prices.

Stay with me throughout the week for the LATEST via the links to Twitter/StockTwits above.  Feel free to comment, retweet etc.

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: Join the Wait List to Join the Newsletter as a Loyal Subscriber, Opening again for the April 3rd issue. If you join and don’t read the newsletter, you will be deleted. Why? I don’t publish to non-readers as other newsletters do. I surround myself with committed people who value what we are doing. Stay tuned here in the meantime and follow all the action via the Twitter® and StockTwits® links above.

Copyright © 2016 By Wall Street Sun and Storm Report, LLC All rights reserved.

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

Market Timing Brief for the 1-29-2016 Close: Beware of Further “Sentiment Shocks” as Stocks Bounce. Gold Rally Continues. Rates Test Important Low.

A Market Timing Report based on the 1-29-2016 Close, published Sunday January 31st, 2016

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

Please first review the Fed FOMC statment update: HERE

1.  SP500 Index: My apologies for not being able to publish the extra post last week, but as it turns out, the delay was helpful, because the market is bouncing.  What I will share today, if you study it carefully, will convince you that what started in January may have been just the first of many market shocks to come.  For now, the market is rallying again…

I believe what has happened in January is much more significant than is generally appreciated in the press.  We’ve had the first of what I am now coining the term for (if it has not been taken, but I’ve never heard it before), which is a “Sentiment Shock!”  Specifically this new term “Sentiment Shock” refers to the AAII.com data on individual investor sentiment.  It occurs when there are two OR more weeks in a row of extremely negative sentiment, which I define as being equal to or greater than a -25% Bull%-Bear% Spread (simply the difference between Bull% minus Bear% for that week) for two or more weeks IN A ROW.  In other words, the spread has to be MINUS 25% or worse in the Bearish direction

DEFINITION my new term “SENTIMENT SHOCK!”

= %Bulls – %Bears ≥ MINUS 25% (i.e., -25% or more Bearish) for two reports or more in a row.

Note that I changed the dates of the AAII.com data to match the end date for voting by investors of the given survey.  (skip this paragraph if you don’t care about the details) The data is collected over an entire week ending on the dates I give below.  AAII reports them with the date of the Thursday after the Weds. evening data collection/voting deadline.  I prefer to match up the trading day which matches the end point for data collection, which is Weds. night.

“Sentiment Shocks” happen to be rare and reserved for special times.  I was amazed to find that the last one I could find BEFORE the 2007 top was in 1992 (10-15-92 to 10-22-92: a 2 wk sentiment shock).  It lasted 2 weeks from 10-15-92 to 10-22-92.  In other words, this system would have failed completely during the 2000 tech bubble crash.

Then why is it important now?  What I think is significant is that we’ve just had a “Sentiment Shock” that span the reporting periods of 1-13-2016 and 1-20-2016.  This week ending 1-27-2016, the “SURVEY SAID!  (I love to type that in honor of Richard Dawson of the original Family Feud!  lol)  the data went back to a more benign negative spread of %Bulls – %Bears of -10.2%, so the January Sentiment Shock is “over.”  That does not preclude another one occurring soon (weeks away?), as the data show from the 2007 sell-off shown below in both chart and text:

Keep up to date at Twitter and StockTwits: See my messages on Twitter® Follow Me on Twitter®.   Follow Me on StockTwits®).

SP500 Index Chart (click chart to enlarge; SPX, SPY): The raw sentiment shock data is shown below the chart. The red arrows are aligned with the first date the particular sentiment shock began.  Note that there were SIX “Sentiment Shocks” from 2007-2009, and we’ve just had our first since then!

sp500-index-market-timing-chart-sentiment-shocks-2016-01-29-close

Investor “Sentiment Shock” History of the Market since 2007.

 

11-21-07 to 11-28-07: 2 wk shock

then 35 days (days, not trading days) later…

1-2-08 to 1-23-08: 4 wk shock.

then 42 days later…

3-5-08 to 3-19-08: 2 wk shock.

then 105 days later…

7-2-08 to 7-16-08: 3 wk shock.

then 56 days later…

9-10-08 to 9-17-08: 2 wk shock.

then 154 days later…

2-18-09 to 3-11-09: 4 wk shock. That was the market low in 2009

and NOW for the latest “Sentiment Shock” 2,499 days later…

Amazing, but it’s been that long!  6.85 Years!

THE LATEST SENTIMENT SHOCK: 1-13-2016 to 1-20-2016: 2 wk shock

Why didn’t the market set off a sentiment shock back in August?  I believe investors were just starting to see the downturn in the economy represented by falling industrial production in Summer 2015.  Plus, by Weds. after the Monday Flash Crash of Aug. 24th, 2015, the market closed at 1940.51, almost exactly where we closed this past Friday at 1940.24.  So sentiment had likely recovered already.  Remember that a “Sentiment Shock” is significant, because it has to by definition last TWO reporting periods, and not just be a one week wonder.

What do I expect?  I expect that if there is a failure of the economic system under way, that there will be another sentiment shock within a matter of weeks (5-6) to a few months at most.  That will signal us to reduce our exposure further to the market until we see much lower prices or a solid bottoming formation created over many months, not days or weeks, along with signs of economic repair.

Once a system starts shaking, it may continue to shake until it nearly falls apart, unless something is done to stabilize it.  I believe the Fed will try to stabilize the markets and that is why there could be a delay before more selling starts up in earnest again, but I am doubtful that the Fed will be able to save the economy this time around from slowing into a recession of some magnitude.  The coming recession, if it occurs, and some say it is inevitable now, does not have to be long and deep unless policy makers are fighting each other in Washington under a deadlocked Congress.  Hmmmm that’s the new culture in Washington, so don’t look for help there.  Obviously the prior QE program was not a permanent fix for the economy or it would not have started slowing again last summer.  The economy ebbs and flows in cycles and these need to be allowed to some extent or it creates problems.  Some say QE did very little to help.

For now I expect a further stock market rally, though no one can guarantee that including me!  The easy money is now coming from China, the ECB, and Japan, which just adopted negative interest rates.  The move by Japan was linked to the strong rally on Friday.  If negative rates don’t force them to invest in stocks, nothing will!  ;)

One question is whether the Fed will take back the 0.25% hike or not.  It was clearly a policy error.  I am not defending their policy, but rather just saying it was inconsistent with what they had done. 

I am an advocate of free markets with some help on the fiscal and monetary sides during big downturns, but what the Fed and Congress did in the 2007-2009 Great Recession was to help lousy businesses survive. That creates inefficiencies in the markets, because the markets don’t get to decide who survives.  They should in most cases.

Now we are paying for that error.  Was some of the help useful?  Perhaps, but the government is now helping auto companies hand out money to “bad-bet buyers” JUST as they did in 2007.  It’s cars this time, not houses.  They WILL NOT LEARN!  And it’s oil too that is in trouble with over-leverage against falling energy prices.  I suspect you’ll see them step in to stabilize bad oil loans too if they feel they must.

I don’t believe QE4 would help, but the Federal Reserve may use that tool to attempt to devalue the dollar.  China has been much more obvious than the EU by directly devaluing their currency, the yuan.  Trump, whether right or wrong about a variety of other issues, is right that China is cheating our companies in unfair price competition through devaluation. 

The U.S. used it’s own tricks and can be criticized as well. It’s a currency war, some obvious, the rest less obvious and hidden behind statements like “The Fed does not speak about the U.S. dollar as that is Treasury’s job.”  Baloney!

That is a summary of the doomy/gloomy viewpoint, so where’s the sunshine.  The sunshine is in the top chart of my update this week. Click: HERE  to view it!  The market as I explained this week is now “UN-broken.”

“UN-broken” does not mean the stock market (SP500 Index OR Russell 3000) is healed and off to the races. It means the Bulls have an argument and a chance for a further rally.  This low is special because rates are also testing their lows. (see last chart)

So we will ride this rally, and look for a spot to decrease our exposure closer to what looks like the top of a range.  That is a day to day, week to week assessment, so stay tuned via Twitter/StockTwits (links above the 1st chart toward top).  (You don’t have to SEND messages to read them!  If you like, create a locked account and never tweet, but if you follow me, my messages will appear on your Twitter/StockTwits stream.)

We have to assume the selling is not over until there is technical repair of the damage done to the markets.  Some repair has occurred as my “UN-broken” statement said, which is why we’re invested in this rally.  Is there danger of a quick breakdown?  Sure.  That’s the nature of the beast.  But I state my exposure level on Twitter to keep this real.  Risk is real for me too.  The market is tested every day.  But we do not buy high, sell low here.

Speaking of low…the small caps will have to survive a nearby test…while coming off a deep dive…

2. U.S. Small caps are now very close to the 1040 test. If they fail there, don’t expect large caps to save the day for long.  A repair of that 1040 breach would be significant for the market as a whole.  (One day over does not = “repaired”)

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

rut-small cap-index-market-timing-chart-2016-01-29-close

Small caps are facing immediate overhead resistance at 1040ish.

3. Gold is rallying probably in part based on the expectation that the Fed will have to weaken the dollar indirectly through their policy decisions.  I think the dollar will be managed lower and that is the reason to own gold.  If there is financial panic, and only then, will you see the US dollar rally with gold in a big way. 

Gold looks like it has a bit farther to go.  Preserve profits if you have them from a recent entry!  Beyond a core “Currency Insurance” gold position, it’s important to trade rather than hold additional gold.  If you have none, buy some and use a stop loss on any new positions.  Of course, decide on your own, but gold is part of a diversified portfolio in my opinion, especially if you can get it at reasonable prices. 

The 103.43 reversal was an important reversal for GLD.  If that holds, gold is fine.  If we fall back below there, the Bear could start all over again.  We could be seeing a NEW Bull Market in Gold, but it’s unproven.  This is an investable low is all we know. 

Some criticize me occasionally for not being clear. How’s this: BUY SOME DAMN GOLD if you own none!  ;)  Sell it if we break 103.43 on a close. 

And don’t call me if it closes below 103.43 and then comes back and rallies hard.  This is a day to day process.  We’ll buy it back again if it does that, but perhaps a bit higher.

Gold ETF (click chart to enlarge; GLD):

gld-gold-etf-market-timing-chart-2016-01-29-close

Gold rally continues.

4. U.S. 10 Year Treasury Note Yield (click chart to enlarge; TNX,TYX,TLT,TBF): We are trading the range, so I’m nearly all out of TLT at this point.  That may be wrong obviously.  If it breaks to higher highs, I’ll have to join in again.  There could be a panic into US Treasuries.  A fall below that 1.905% base would be a further danger sign about the U.S. economy.  Low rates help the economy, but could indicate an upcoming recession as discussed earlier.

See you on Twitter/StockTwits this week!  Feel free to comment, retweet etc.

tnx-10-year-treasury-note-market-timing-chart-2016-01-29-close

10 Year Treasury Yield testing a key low.

Stay with me throughout the week for the LATEST via the links to Twitter/StockTwits 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.

Note that the newsletter is now CLOSED to new subscriptions: Join the Wait List to Join the Newsletter as a Loyal Subscriber, Opening again for the April 3rd issue. If you join and don’t read the newsletter, you will be deleted. Why? I don’t publish to non-readers as other newsletters do. I surround myself with committed people who value what we are doing. Stay tuned here in the meantime and follow all the action via the Twitter® and StockTwits® links above.

Copyright © 2016 By Wall Street Sun and Storm Report, LLC All rights reserved.

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

Market Timing Brief for 1-27-2016: January Fed Statement Changes from December FOMC Statement

The Fed Statement Changes from December 2015 vs. Jan 2016:

Big Changes, the Bad and the Good:

Bad:

Note they still don’t understand that low energy prices are here to stay. They will fluctuate of course, but from permanently lower levels.

“Inflation is expected to remain low in the near term, in part because of the further declines in energy prices, but to rise to 2 percent over the medium term as the transitory effects of declines in energy and import prices dissipate and the labor market strengthens further.”

Nope!  Just don’t see the deflation!

“Market-based measures of inflation compensation declined further; survey-based measures of longer-term inflation expectations are little changed, on balance, in recent months.”

Good:

At least they are not totally brain dead in that they see some risk on the global scene. Not very serious about it though as they don’t admit their outlook is too optimistic.  Just that they may have to admit a policy error by the next meeting!

“The Committee is closely monitoring global economic and financial developments and is assessing their implications for the labor market and inflation, and for the balance of risks to the outlook.”

Did also recognize that growth is slowing to some extent:

From 1st Sentence: “labor market conditions improved further even as economic growth slowed late last year”

The Fed also issued a statement about their policy goals, amending them a bit to recognize that they consider inflation AND DEFLATION risks.  That is a nod to those concerned about the risks of deflation:

Here is the entire statement

“Release Date: January 27, 2016

For release at 2:00 p.m. EST

As part of its annual organizational meeting actions, the Federal Open Market Committee reaffirmed its “Statement on Longer-Run Goals and Monetary Policy Strategy,” with a revision to clarify that it views its inflation objective as symmetric, and with an updated reference to participants’ estimates of the longer-run normal unemployment rate in the most recent Summary of Economic Projections (December 2015).

In October 2014, in preparation for the annual reaffirmation, the Committee discussed the potential benefits of amending the statement to clarify that its inflation objective is symmetric. As indicated in the minutes of that meeting, there was general agreement on the symmetry of the objective. Following further Committee discussion regarding the most appropriate way to express this clarification, the statement has been amended to indicate that the “Committee would be concerned if inflation were running persistently above or below” its 2 percent objective. All but one participant supported the amended statement.

The Committee first adopted the statement at its January 2012 meeting and has reaffirmed it, with appropriate revisions, at its annual organizational meetings each January.

Voting for the statement were: Janet L. Yellen, Chair; William C. Dudley, Vice Chairman; Lael Brainard; Stanley Fischer; Esther L. George; Loretta J. Mester; Jerome H. Powell; Eric Rosengren; and Daniel K. Tarullo. Voting against was James Bullard, who agreed the Committee’s inflation goal is symmetric, but believed the amended language is not sufficiently focused on expected future deviations of inflation from the goal.”

You can review the rest of the changes below, but in summary, the Fed:

  1. Sees inflation still rising to 2% over time as oil prices rise (despite evidence to the contrary.)
  2. Sees employment as remaining strong.
  3. Sees growth as having slowed a bit in Q4 2015, but it does not seem to have any doubt that the trajectory of the economy is UP, not down.  The fact that industrial production has been in a steady decline since the summer does not seem to phase them.
  4. They will watch for higher levels of economic risk on a global basis. This is lip service, but at least as I said, they are not brain dead.
Federal Reserve FOMC 1

page 1

Federal Reserve FOMC 2 Federal Reserve FOMC 3

Keep up to date at Twitter and StockTwits: See my messages on Twitter® Follow Me on Twitter®.   Follow Me on StockTwits®).

Stay with me through the week via the links to Twitter/StockTwits 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.

Note that the newsletter is now CLOSED to new subscriptions: Join the Wait List to Join the Newsletter as a Loyal Subscriber, Opening again for the April 3rd issue. If you join and don’t read the newsletter, you will be deleted. Why? I don’t publish to non-readers as other newsletters do. I surround myself with committed people who value what we are doing. Stay tuned here in the meantime and follow all the action via the Twitter® and StockTwits® links above.

Copyright © 2016 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 1-22-2016 Close (UPDATED 2-08-2016 and1-29-2016): Stocks Bounce From Brink. Gold Waiting for US Dollar. Rates Range Bound.

A Market Timing Report based on the 1-22-2016 Close, published Sunday January 24th, 2016

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

UPDATE 2-8-2016: We could go back to “broken” again from “UN-broken today with a close of the Russell 3000 (see chart below) below 1079.87 (Oct. 2014 low).  If that happens, it must quickly reverse OR ELSE watch out below.  That said, be careful of making big moves in the market, but instead consider taking smaller steps OUT of or INTO the market.

UPDATE 1-29-2016: The market was said to have broken down based on a break of the Russell 3000 Index, an index composed of the top 3000 companies in the U.S. by capitalization. Not any more, which gives the Bulls a big edge having reversed not one but TWO levels where it had previously broken down.  I call this market “UN-broken.”  Check Twitter/StockTwits links below for more.

russell-3000-index-market-timing-chart-2016-01-29-1216pm

Russell 3000 has reversed TWO breaks.

1.  SP500 Index: I said “We’ll be back at the Sept. 2015 low if not the Oct. 2014 low fairly soon.”  We did in fact reach the October 2014 (yes, 2014) low as suggested and the index has bounced nicely…so far.  I will be publishing a special edition “Brief” tomorrow on why this could just be the first of several shocks to the market.  Check back HERE (by Mon night) (will be there by Monday night at the latest).

We now have a tradable rally underway, and we did in fact buy both near the low and a bit higher.  This rally may reach all the way back to 1993 for the SP500 Index.  I’ll be watching all the rest of the indices to get a sense for when the rally is stalling.  Keep up with my comments at either of the two links just below here.  I don’t believe the selling is over yet, except for this bounce.  The VIX volatility index did fall quickly below 26.81, but all it needs to do is put in another higher low to keep the pressure on the Bulls.

Keep up to date at Twitter and StockTwits: See my messages on Twitter® Follow Me on Twitter®.   Follow Me on StockTwits®).

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

sp500-index-market-timing-chart-2016-01-22-close

A bounce has started.

2. U.S. Small caps have entered a Bear market even according to my more stringent criteria.  They will now likely bounce all the way to 1040ish if not higher (see chart below), but until they reverse the damage done by reversing UP through 1040, the Bear is still on.  A quick test back above 1040 and a second failure does not count, so that would be a good place to exit should that level fail again.  But let’s see where the market takes us and not get too far ahead of it!  The test is only 20 points higher.

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

rut-small cap-index-market-timing-chart-2016-01-22-close

Small caps are ALREADY in a Bear Market and must reverse the damage to rally in any major way.

3. Gold is STILL barely above the prior breakout.  I said last week: “If stocks recover from here, which is not a given, gold may go sideways to down.”  If the dollar heads back down because a more dovish Fed is anticipated, the gold rally can continue, BUT if the impression becomes that the U.S. economy is still recovering (not in the data yet), gold will fail again and even fall to brand new recent lows.  I’ll be following the dollar and interest rates which are intertwined to get a feel for gold’s likely strength.  Technically, GLD must rise above that lower yellow trend line on the chart to impress me.  My sense is that gold will in fact rally further based on a more dovish Fed.  If the Fed goes back to their “deflation is transitory” idiocy, gold will suffer.

Gold ETF (click chart to enlarge; GLD):

gld-gold-etf-market-timing-chart-2016-01-22-close

Gold is still facing resistance and needs a further dollar sell off to do well.

4. U.S. 10 Year Treasury Note Yield (click chart to enlarge; TNX,TYX,TLT,TBF): I sold more TLT last week and rates in fact did bounce a bit (bond go DOWN when rates go UP).  I believe the 10 Year (TNX) will remain range bound (1.9% to 2.5%) unless we descend into a deeper economic slowdown (recession).  Trade the range!

tnx-10-year-treasury-note-market-timing-chart-2016-01-22-close

Rates remain bound in a range. Could fall if the Fed becomes more dovish vs. their current hawkish position on rates.

Stay with me through the week via the links to Twitter/StockTwits 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.

Note that the newsletter is now CLOSED to new subscriptions: Join the Wait List to Join the Newsletter as a Loyal Subscriber, Opening again for the April 3rd issue. If you join and don’t read the newsletter, you will be deleted. Why? I don’t publish to non-readers as other newsletters do. I surround myself with committed people who value what we are doing. Stay tuned here in the meantime and follow all the action via the Twitter® and StockTwits® links above.

Copyright © 2016 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 , , , , , , , , , , , , , , , , ,

Market Timing Brief for the 1-15-2016 Close: Stocks On the Brink. Gold Teetering. Rates Solidly DOWN.

A Market Timing Report based on the 1-15-2016 Close, published Monday January 18th, 2016

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

1.  SP500 Index: I said “We’ll be back at the Sept. 2015 low if not the Oct. 2014 low fairly soon.”  We hit the Sept. low on Friday and bounced. Will that level hold or will we descend to either the August intraday low or the Oct. 2014 low? No one can claim to know, unless they know that the U.S. is undoubtedly going into a recession.  Maybe a few are fairly certain of that despite others being as firm in the opposite direction.   However, I’ve noticed that some die-hard Bulls are admitting that the market may still weaken a bit more, even if it does not reach the -20% level (which as I said last week does not actually define a Bear market for me).

Stay up to date via the social media links below, because regardless of the outcome, big money is going to be made or lost in a short period of time.  Rising volatility is seeing to that.  The VIX did collapse fairly hard into the close on Friday, but remains above the prior high of 26.81.  If it collapses below that on Tuesday, we could see a VIX reversal and a healing market into this week.

Keep up to date at Twitter and StockTwits: See my messages on Twitter® Follow Me on Twitter®.   Follow Me on StockTwits®).

SP500 Index Chart (click to enlarge; SPX, SPY):

sp500-index-market-timing-chart-2016-01-15-close

Full retest of August low.

2. U.S. Small caps are crashing much faster (higher beta) than the SP500 Index.  Stay away.  Stick with safer large caps with growth prospects and financial stability.  I warned you to stay out of them, although I did take an early bite on Thursday of mid-caps.  That position could work out early this week however.

Russell 2000 U.S. Small Cap Index (RUT, IWM; click to enlarge):

rut-small cap-index-market-timing-chart-2016-01-15-close

Bad break of support.

3. Gold is barely above the prior breakout.  If stocks recover from here, which is not a given, gold may go sideways to down.  I believe it has been a “risk on” trade with the expectation of rising Fed dovishness and a weaker dollar.  That said, I am not impressed with gold’s action of late and have no trading position in GLD, just a long term position for diversification out of currencies.

Gold ETF (GLD; click to enlarge):

gld-gold-etf-market-timing-chart-2016-01-15-close

Gold is barely hanging on above support.

4. U.S. 10 Year Treasury Note Yield (click chart to enlarge; TNX,TYX,TLT,TBF): I said rates would likely continue to fall. They did and are likely to hit the bottom of the range soon at 1.905%.  I sold a bit of exposure at the end of the week as Treasuries (TLT) became a bit overbought.

tnx-10-year-treasury-note-market-timing-chart-2016-01-15-close

Rates still falling toward support.

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: Join the Wait List to Join the Newsletter as a Loyal Subscriber, Opening again for the April 3rd issue. If you join and don’t read the newsletter, you will be deleted. Why? I don’t publish to non-readers as other newsletters do. I surround myself with committed people who value what we are doing. Stay tuned here in the meantime and follow all the action via the Twitter® and StockTwits® links above.

Copyright © 2016 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 , , , , , , , , , , , , , ,

Market Timing Brief for the 1-08-2016 Close: What Will Turn This Market Into A Bear? SP500 Index Headed to Test of Support. Gold Breakout Intact with Falling Rates.

A Market Timing Report based on the 1-08-2016 Close, published Sunday January 10th, 2016

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

1.  SP500 Index: I was correct about the fourth failure of the SP500 Index.  We’ll be back at the Sept. 2015 low if not the Oct. 2014 low fairly soon.  We should see a test of the Sept. low by Monday and that could provide a temporary bounce particularly if there is some cheer-leading from the Fed.  If not, we’ll likely continue lower to test the October 2014 low. 

Below the Oct. 2014 low would be a true Bear market revealing itself.  Remember that the August low was a higher low, which is marginally Bullish.  We need to take out a major low of this Bull market to call it a Bear.  The October 2014 low is the true Bear Prize.   The percentage rules people have for Bear markets were fulfilled in 2011 (over a 20% fall; 21.6%) and yet the Bull market continued. 

The October 2014 low using intraday values (more extreme at top/bottom) is ‘just” 14.7% below the all time intraday SP500 Index high.  That’s enough for me though to call the market a true Bear, one that has clearly changed direction to going DOWN.  It could also be argued that a close below the Aug/Sept lows would define a Bear market and the losses there would be lower still.  Longer term investors could start dumping stocks on a close below each of these major lows.

Keep up to date at Twitter and StockTwits: See my messages on Twitter® Follow Me on Twitter®.   Follow Me on StockTwits®).

SP500 Index Chart (click to enlarge; SPX, SPY):

sp500-index-market-timing-chart-2016-01-08-close

SP500 Index headed down to Fall 2015 support.

2. U.S. Small caps are crashing much faster (higher beta) than the SP500 Index.  Stay away.  Stick with safer large caps with growth prospects and financial stability.

Russell 2000 U.S. Small Cap Index (RUT, IWM; click to enlarge):

rut-small cap-index-market-timing-chart-2016-01-08-close

Small caps have nearly reached 1st major support.

3. Gold has completed the 3rd day of a major reversal to the UPSIDE (defined as being above 103.43 on the chart below; red line).  It is a trading buy as long as the breakout holds.  Use a stop on all new positions.  If you won’t use a stop, please don’t buy gold unless you have no exposure to it.  Sell if it falls below the red line even on an intraday basis.  It SHOULD rally from here unless the market is not clear on the trade, and if it’s not clear, I don’t want to have additional gold exposure! (I am holding ONLY profits from buying gold in the high 300’s, so I have no need to sell.  I reclaimed my entire principle at a gold price of around 1370 on the way down.)

Gold ETF (GLD; click to enlarge):

gld-gold-etf-market-timing-chart-2016-01-08-close

Gold is finally acting better, but dollar strength may be in the way.

4. U.S. 10 Year Treasury Note Yield (click chart to enlarge; TNX,TYX,TLT,TBF): Rates should keep falling as the Fed is moving in the wrong direction.  The more they tighten the Fed funds rates, the better it gets for long bonds.  Eventually they’ll invert the yield curve if they stay on course to raise rates up to 4 times in 2016.

tnx-10-year-treasury-note-market-timing-chart-2016-01-08-close

Rates should keep falling. Otherwise lower your exposure to longer bonds.

What to look for?  If TNX trades above that lower yellow trend line, lighten up on longer bonds.  The market should be convinced now that the Fed has done the wrong thing.  If they are NOT convinced, then bond performance will stink, and I will want to have less exposure to them.

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: Join the Wait List to Join the Newsletter as a Loyal Subscriber, Opening again for the April 3rd issue. If you join and don’t read the newsletter, you will be deleted. Why? I don’t publish to non-readers as other newsletters do. I surround myself with committed people who value what we are doing. Stay tuned here in the meantime and follow all the action via the Twitter® and StockTwits® links above.

Copyright © 2016 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 , , , , , , , , , , , , , , ,

Market Timing Brief for the 12-31-2015 Close: SP500 Index Marks Fourth Failure. Gold Continues Consolidation. Rates Fall Back Into Triangle.

A Market Timing Report based on the 12-31-2015 Close, published Sunday January 3rd, 2016

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

Happy New Year to you all!  Let’s make this a great year whatever the market throws our way.

1.  SP500 Index: Last week I said: “Now would be a perfect time on the chart for the Bears to reassert themselves.”  It took a while, but finally on New Year’s Eve, the market marked a FOURTH failure vs. the top green line shown in the chart below.  The Bulls will have to come up with a solid employment report on January 8th and great fourth quarter earnings to follow that or this market will test still lower.  The next downside targets are marked on the chart.  I am expecting more downside.  Things change quickly, so please keep in touch via Twitter and/or StockTwits using the links just below… 

Keep up to date at Twitter and StockTwits: See my messages on Twitter® Follow Me on Twitter®.   Follow Me on StockTwits®).

SP500 Index Chart (click to enlarge; SPX, SPY):

sp500-index-market-timing-chart-2015-12-31-close

SP500 Fails for a Fourth Time

2. U.S. Small caps did in fact turn over as suspected last week.

Russell 2000 U.S. Small Cap Index (RUT, IWM; click to enlarge):

rut-small cap-index-market-timing-chart-2015-12-31-close

Small caps slipping again.

3. Gold (once again!) is lingering BELOW prior major support.  With the Fed planning rate hikes into a deflationary environment, gold will likely continue to languish, short of a financial panic.  The dollar will continue to strengthen as long as the Fed stays on their current course.

Gold ETF (GLD; click to enlarge):

gld-gold-etf-market-timing-chart-2015-12-31-close

Gold consolidating below prior major support – STILL!

4. U.S. 10 Year Treasury Note Yield (click chart to enlarge; TNX,TYX,TLT,TBF): Also correct from last week: “Rates are about mid-range and are not likely to rise much while the Federal Reserve is raising rates, unless inflation does actually show up.” You can safely hold bonds and Treasuries for a while as long as the Fed remains relatively hawkish vs. the rest of the world.  Junk bonds are another story if the Fed succeeds in tipping the U.S. economy into a recession.  Rates have fallen from the initial spike when the Fed hiked the Fed Funds rate by 0.25%.  That’s what we expected.

If you see rates rise above that 12-16 level, start paying attention.  If the Federal Reserve keeps going with their current view/actions, long rates will continue to stay stable and will likely fall somewhat.  If they cause a recession, rates will fall harder.

tnx-10-year-treasury-note-market-timing-chart-2014-12-31-close

Rates push down again with stocks selling off.

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: Join the Wait List to Join the Newsletter as a Loyal Subscriber, Opening again for the April 3rd issue. If you join and don’t read the newsletter, you will be deleted. Why? I don’t publish to non-readers as other newsletters do. I surround myself with committed people who value what we are doing. Stay tuned here in the meantime and follow all the action via the Twitter® and StockTwits® links above.

Copyright © 2016 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 , , , , , , , , , , , , , , ,