Market Timing Brief™ for the 7-22-2016 Close (UPDATE 7-27-2016 for Fed Statement): SP500 Index Pauses at New High Ahead of Fed. Gold Eases. Rates Drop Slightly.

A Market Timing Report based on the 7-22-2016 Close, published Sunday July 24th, 2016

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

UPDATE 7-27-20126 #2: Here is what the Federal Reserve was really saying and what they were REALLY thinking:

“The US labor market is stronger with increased labor utilization, which could raise wages and force a rate hike, and economic activity is expanding at a moderate rate.  Household spending is growing strongly while business fixed investment has been soft. Inflation is below target, but the influences that have been keeping it down are transitory in our view.

We believe that, overall, the economy is improving enough to raise rates fairly soon, but we are chicken, and we’re planning on being accommodative whatever that takes. 

In other words, we are not telling you what we’ll do and you’ll have to guess, because we honestly have no idea about when we should raise rates.  But don’t go making any bubbles out there in the markets, because we could raise rates at any time given the economic data and mess your hyper-Bullish financial plans up.” 

UPDATE 7-27-2016  #1  –  Federal Reserve FOMC Statement:

Here are the changes from last month.  [IN BLUE ] means deleted and BOLD means new language since last month.

Press Release

Release Date: [June 15] July 27, 2016

For release at 2:00 p.m. EDT

Information received since the Federal Open Market Committee met in [April] June indicates that the [pace of improvement in the] labor market [has slowed while growth in] strengthened and that economic activity [appears to have picked up. Although the unemployment ] has been expanding at a moderate rate [has declined, job.] Job gains [have diminished. Growth] were strong in June following weak growth in May. On balance, payrolls and other labor market indicators point to some increase in [household] labor utilization in recent months. Household spending has [strengthened. Since the beginning of the year, the household sector has continued to improve and the drag from net exports appears to have lessened] been growing strongly but business fixed investment has been soft. Inflation has continued to run below the Committee’s 2 percent longer-run objective, partly reflecting earlier declines in energy prices and in prices of non-energy imports. Market-based measures of inflation compensation [declined] remain low; most survey-based measures of longer-term inflation expectations are little changed, on balance, in recent months.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee currently expects that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace and labor market indicators will strengthen. Inflation is expected to remain low in the near term, in part because of earlier declines in energy prices, but to rise to 2 percent over the medium term as the transitory effects of past declines in energy and import prices dissipate and the labor market strengthens further. Near-term risks to the economic outlook have diminished. The Committee continues to closely monitor inflation indicators and global economic and financial developments.

Against this backdrop, the Committee decided to maintain the target range for the federal funds rate at 1/4 to 1/2 percent. The stance of monetary policy remains accommodative, thereby supporting further improvement in labor market conditions and a return to 2 percent inflation.

In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to its objectives of maximum employment and 2 percent inflation. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments. In light of the current shortfall of inflation from 2 percent, the Committee will carefully monitor actual and expected progress toward its inflation goal. The Committee expects that economic conditions will evolve in a manner that will warrant only gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run. However, the actual path of the federal funds rate will depend on the economic outlook as informed by incoming data.

The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction, and it anticipates doing so until normalization of the level of the federal funds rate is well under way. This policy, by keeping the Committee’s holdings of longer-term securities at sizable levels, should help maintain accommodative financial conditions.

Voting for the FOMC monetary policy action were: Janet L. Yellen, Chair; William C. Dudley, Vice Chairman; Lael Brainard; James Bullard; Stanley Fischer; [Esther George]; Loretta J. Mester; Jerome H. Powell; Eric Rosengren; and Daniel K. Tarullo. Voting against the action was Esther L. George, who preferred at this meeting to raise the target range for the federal funds rate to 1/2 to 3/4 percent.

There you have it.  The market reaction thus far vs. the 2 pm opening prices is SPY up 0.24%, IWM +0.17%, GLD up +0.43%, and GDX up 2.67%, and TLT up 0.12%.

Back to the issue…

1.  SP500 Index: The market is hanging close to the new high it established above 2134.71 on 5-20-2015, now at 2175.03, 1.89% above the prior high.  The market timing data on news highs after a prolonged period of no progress of a year or more are very Bullish. Review what I wrote last week on what I’m actually doing about it.  I’ve been trimming my individual stock exposure over time and have sold some U.S. exposure near the highs, while adding some Chinese stock market exposure.  I added some gold exposure on the pullback this week.  What I am doing is noted on my Twitter/StockTwits feeds every market day (links below).

Earnings season is mixed so far.  Some groups are having a worse time of it, particularly the regional banks.

The Federal Reserve has a two day FOMC meeting this next week on July 26 and 27th with no dog and pony show to follow, just the written statement.  The markets would be shocked by a rate hike as the current probability per the CME group is just 3.6%.  The Fed has been very reluctant to hike rates when both Japan and Europe have negative interest rate policies.  Here is where you can follow the changes in their number day to day: CME Group Fed Rate Hike Risk

Note that I highlighted the volume decline during part of the recent rally.  That means this rally has been a bit shaky as volume rises with price in a healthy market.

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

***DATE OF CHART IS ACTUALLY 7-22-2016 CLOSE***

sp500-index-spx-market-timing-chart-2016-07-22-close

Market holds new highs.

Survey Says!  Sentiment this week among retail investors (AAII.com) showed a Bull minus Bear percentage spread that went down just a bit to +8.71% [over 40% Neutrals is Bullish for market timing 6 months out]).  At these levels there is plenty of room for sentiment to go in either direction.

7-21-16 12 am CT close to poll Bulls       35.43% Neutrals 37.85% Bears      26.72%

Please 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: I made some money on a quick addition to my IWM short last week, but kept the core short position.  The Bulls have the edge based on the new closing high above the prior top.  A quick reversal is needed or my short will fail.  The close did not take out the 7-21-2016 high of 1213.52.  Remember that I am using this to hedge just about 5% of my long positions.

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

***DATE OF CHART IS ACTUALLY 7-22-2016 CLOSE***

rut-small cap-index-market-timing-chart-2016-07-22-close

Small Caps flirt with a new high.

3. Gold: I bought more gold on the pullback.  When you are in a Bull market, buy the pullbacks, not the rips to the upside.  Gold could keep falling a bit more, and if the economy actual turns around, it could fall a lot more, so don’t get too cozy with your trading position.  With the central bank antics around the world, the intermediate trade is likely safe however.

The dollar is still rising which is OK when there is a financial rush to safety, but not OK if there is not.  In any case, a strong dollar pressures the gold price for those buying it in U.S. dollar terms.  If the dollar goes back to the 2015 highs, the stock market won’t like it due to pressured earnings abroad.  This is especially true of international large cap stocks and less so for small caps.  A strong dollar is OK if the economy is strong, but hurts when it’s not. 

If you want a bigger “pop,” which also means larger losses if gold falls more, buy the gold miner ETF, GDX. 

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

gld-etf-market-timing-chart-2016-07-22-close

Bought gold on the pullback.

4. U.S. 10 Year Treasury Note Yield (TNX): U.S. 10 Year Treasury Note Yield (click chart to enlarge; TNX,TYX,TLT,TBF): The 10 year yield needs to hold above 1.567% to keep the momentum going into the Fed meeting statement to be released at 2 pm on Wednesday.

tnx-10-year-treasury-note-market-timing-chart-2016-07-22-close

1.567% needs to hold if rates are to rise further near term.

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

Be sure to visit the website for more general investing knowledge 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 October 2nd 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, federal reserve, gold, investment, investor sentiment, large cap stocks, S&P 500 Index, small cap stocks, Treasuries | Tagged , , , , , , , , , , , , , , , , , | Leave a comment

Market Timing Brief™ for the 7-15-2016 Close: SP500 Index Four Days Over the Top. Gold Pauses as Interest Rates Spike.

A Market Timing Report based on the 7-15-2016 Close, published Sunday July 17th, 2016

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

1.  SP500 Index: Earnings season has arrived, and the SP500 Index is now 4 days over the prior all time high.  There is a common understanding among market timing technical analysts to look for 3 days above a breakout to confirm it.  That idea never precludes a reversal!  Still, there is no reason the SP500 Index cannot make more progress given sufficient earnings this quarter. 

Bears should note that earnings are down 2.5% and revenues are up 0.5% vs. the same period last year.  Here are the numbers: Start of Q2 Earnings Season: The Stats 

You’ll note that analysts are expecting a rise of earnings to about flat from negative for Q3 and a much bigger boost going into the holiday quarter of 2016 and into 2017.  Those expectations could be pressured if worldwide slowing continues.  The election may throw some curve balls too.  The drip, drip, drip of terrorist attacks could weigh on consumers eventually should it continue.  If you expect the acceleration of earnings, you should be long stocks and just hang on for the ride.

The longer term good news may be that our government is finally going to move into action again, hopefully in ways that support rather than cripple the economy.

A final Bullish note.  I have read from two sources that if the SP500 treads water for a year and then breaks out, further double digit gains are likely.  Keep that in mind before you throw in the towel.  

What have I done?  I have lightened stock exposure just a bit in part by shorting small cap stocks.  I added a very well valued utility in the form of a long term options play.  I trimmed some gold miner exposure to take substantial profits and will look for a place to re-enter lower.  See below for my move in the bond realm.  I sold some.  Check my Twitter/StockTwits feeds (links below) for information on my current exposure level and adjust it according to your own view.

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

sp500-index-spx-market-timing-chart-2016-07-15-close

SP500 Index is 4 Days “Over”

Survey Says!  Sentiment this week among individual investors (AAII.com) showed a Bull minus Bear percentage spread at +12.45% this past Wednesday [over 40% Neutrals is Bullish for market timing 6 months out]).

7-14-16 12 am CT close to poll Bulls  36.87% Neutrals 38.71% Bears 24.42%

As I explained last week, we should expect more positive sentiment at a top now moving on to new highs.  The market may pull back a bit if earnings continue on the light side against the current backdrop of higher employment with rising wages in the most recent reports.

I told you exactly what your choices were last week (see prior issue link to upper right).  You must make your own decisions, but you can view my current exposure to the market here at the following links.

Please 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: I decided to short the IWM given the likelihood that earnings could continue to be tough for the small caps.  You can follow that trade on the above links.  I am using the short position to offset some SP500 Index long exposure. 

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

rut-small cap-index-market-timing-chart-2016-07-15-close

Small caps COULD come off from this lower double top.

3. Gold: The gold rally is pausing.  Follow the dollar chart just below the gold chart.  I would begin buying here if you have no gold exposure, but otherwise wait for it to hit those up trend lines in yellow you see on the chart below OR wait until you see the U.S. dollar rally break down.  I sold some of my gold stock exposure making about 28.5% on my capital at risk in an options trade.  The trade made me a credit when I first opened it, which is a great way to enter the market (if you are invested in the right direction!). 

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

gld-etf-market-timing-chart-2016-07-15-close

Gold is on pause. Watch the dollar.

UUP (U.S. Dollar Index ETF, market timing chart):

uup-us-dollar-index-etf-market-timing-chart-2016-07-15-close

US dollar will determine gold’s next move.

4. U.S. 10 Year Treasury Note Yield (TNX): This week we saw a REVERSAL of the prior break to a new low below the 2012 low.  The below is a weekly chart.  The bounce in rates was hard and fast but it could extend still higher.  GDP is not going to be that bad for Q2 and wages are rising, so the market is going to be a bit afraid of the Fed over the next 6 months despite the gloom and doom talk we previously heard around Brexit. 

The bond move was very stretched, so I let go of about 25% of my municipal bond position which is 50% of my trading position in munis.

My sense so far is that we are muddling through.  Markets can do OK in muddle-through conditions.  If you believe those predicting an all out recession, you should substantially decrease your exposure in stocks.  Recessions are stock market killers.  I have taken a middle ground so far, lowering my exposure a bit by moving some assets to cash and adding a small trading short small cap position.

U.S. 10 Year Treasury Note Yield (click chart to enlarge; TNX,TYX,TLT,TBF):

tnx-10-year-treasury-note-market-timing-chart-2016-07-15-close

Rates rise off major low reversal.

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

Be sure to visit the website for more general investing knowledge 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 October 2nd 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, federal reserve, gold, investment, investor sentiment, large cap stocks, S&P 500 Index, small cap stocks, Treasuries | Tagged , , , , , , , , , , , , , , , , , , | Leave a comment

Market Timing Brief™ for the 7-08-2016 Close: SP500 Index Flirting with Prior All Time High. Gold Still Rallying with New Lows in Rates.

A Market Timing Report based on the 7-08-2016 Close, published Sunday July 10th, 2016

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

UPDATE 7-11-2016 After the Close: Where Will Gold Go Now?

I wanted to update this post with information on the market timing relationship of the US dollar vs. gold and their relationship to economic growth.  First read this: When Does Gold Shine

Then come back and look at the recent market trend:  You see that gold has been rising while the US. dollar has been falling.  That was until Brexit hit.  Remember that European panic mode is one time that gold and the U.S dollar can go up together. 

The tricky part now is that if stocks continue to climb WHILE the economy improves (let’s see what earnings show…), then interest rates will climb as the market anticipates Fed action, positive real rates will result, the dollar will climb further, and gold will sell off.  Only in the case of European financial panic (still possible if other countries leave the EU), will gold continue climbing with the US dollar. 

Alternatively, if earnings and forward predictions stink, the dollar and US interest rates will fall further and gold will love it.  This is how we do market timing on the gold market.

uup-us-dollar.vs-gold-etf-gld-market-timing-chart-2016-07-11-close

Market timing the U.S. dollar vs gold (yellow line).

1.  SP500 Index: Despite Brexit, the market has risen over the last two weeks and despite the fact that the longer term average of new jobs created each month is still in a downtrend due to the prior extremely weak numbers, the 287,000 jobs created this past month fed Bull fever on Friday.  In market timing terms, we’re nearly back to the prior all time high.  Admittedly, the rather high jobs number should raise some concern for Bears that U.S. economic activity is not quite as bad as they were thinking. It will take several more months of positive data like that to turn the trend around.

That said the picture remains very mixed.  With crashing rates around the world, I don’t expect growth to be picking up in a big way any time soon.  If sluggishness around the world is reflected in the earnings season, which begins officially after the close on Monday, the market may give us an opportunity to buy lower.  Check my Twitter/StockTwits feeds (links below) for information on my current exposure level and adjust it according to your own view.

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

sp500-index-spx-market-timing-chart-2016-07-08-close

Nearly back to all time high.

Survey Says!  Sentiment this week among individual investors (AAII.com) showed a Bull minus Bear percentage spread at + 4.41% this past Wednesday (Bulls 31.06% and Bears 26.65% with Neutrals at 42.29% [over 40% Neutrals is Bullish for market timing 6 months out]).  We should expect more positive sentiment at a top.  This means there is potential for more Bullish action, especially given the high neutral reading; however, if earnings season delivers more weak results and forward guidance does not indicate an uptick in economic activity, the market will fall and give us a better entry point as I said above.  We are at a market timing pivot point.

So what do you do when the market is at a top?  First, it’s a ridiculous place to buy stocks.  Buy when there is fear, not when investors are more complacent, unless you are simply averaging in over time.  Second, you could sell a bit if you are now overexposed to the market and redeploy the assets to other investments, or hold a bit more cash until the SP500 Index corrects.  Third, you could sit tight and only sell some stock exposure after the market begins pulling back a few percentage points from the high.  Selling once there is a high level of fear is as dumb as buying at a top.

Please 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: Be careful of high beta stock exposure going into earnings season.  Small caps are higher beta on average.

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

rut-small cap-index-market-timing-chart-2016-07-08-close

Small caps keep rallying despite the lack of GAAP earnings on a trailing 12 month basis.

3. Gold: The gold rally is still under way, but buy pullbacks as things are still stretched.  Chasing rallies is in general a poor strategy.  If you must chase, buy just a little and then add on the dips and at the bases of consolidations. The chart below is a weekly chart.

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

gld-etf-market-timing-chart-2016-07-08-close

If you miszed it, you missed it. Be patient now.

4. U.S. 10 Year Treasury Note Yield (TNX): That was quick!  Read my note from last week in which I said brand new lows below the 2012 low were probable.  This is not good news for economic growth over the longer term.  Rising rates accompany economic growth.

U.S. 10 Year Treasury Note Yield (click chart to enlarge; TNX,TYX,TLT,TBF):

tnx-10-year-treasury-note-market-timing-chart-2016-07-08-close

10 Year Note Yield falls below the 2012 low.

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

Be sure to visit the website for more general investing knowledge 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 July 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, federal reserve, gold, investment, investor sentiment, large cap stocks, S&P 500 Index, small cap stocks, Treasuries | Tagged , , , , , , , , , , , , , , , | Leave a comment

Market Timing Brief™ for the 7-01-2016 Close: SP500 Index Bounces Hard Post-Brexit. Gold Takes Off Further as Rates Retest a Major Low.

A Market Timing Report based on the 7-01-2016 Close, published Sunday July 3rd, 2016

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

1.  SP500 Index: When you have a bounce as rapid as the one we saw post-Brexit, there is a risk of a pullback.  It may only be a shallow one; however, be careful of individual stock risk going into earnings season.  Stocks that don’t meet expectations of either earnings and/or guidance will be more severely punished than usual. 

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

sp500-index-spx-market-timing-chart-2016-07-01-close

Rapid bounce means we could see a pullback or a pause at best.

Survey Says!  Sentiment this week among individual investors (AAII.com) showed a Bull minus Bear percentage spread at minus 4.51% this past Wednesday (Bulls 28.91% and Bears 33.42% with Neutrals at 37.67% [over 40% Neutrals is Bullish for market timing 6 months out]).  Sentiment is not particularly helpful at these levels, as there is plenty of room for it to be pushed in either direction by the news flow; however, it certainly does not reflect the sentiment we would see at a top.  Investors should be cheering stocks near prior highs.  There is hesitation in the negative spread.  Investors are expecting a pullback. 

Please 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: Caution is advised going into earnings as small caps are more volatile than large caps.  The name for that risk is “beta.”  Beta works for you when stocks are rising and against you when stocks fall.

We bought some mid-caps recently, because their beta is lower than small caps and their earnings have been better.  The top of this bounce is not a good time to add to such a position.  Why go mid vs. small?  You can see on my Twitter home page (above link) that the mid caps have nearly matched the performance of small cap stocks during the recent rise from the February low.

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

rut-small cap-index-market-timing-chart-2016-07-01-close

U.S. Small Cap stocks rise to the April high.

3. Gold: Gold continues to serve us well as rates stay very low in the U.S. and foreign rates remain negative.  Financial institutions are going to be in deep trouble over time as the entire insurance industry depends on positive rates for survival.  If their stock returns go negative, they will be in even worse trouble.

Gold comes with a warning sticker: If the economy begins to improve allowing for a rise in earnings, be careful of being overexposed to gold.   Gold makes investors nothing and does not do well against that kind of competition.  Rates will rise if the economy improves, which also stiffens competition.

If you did not listen to me back in January, listen now.  Don’t buy the rips, buy the dips.  And remember the caveat from above: There could be a more substantial pullback in gold, if some of earnings season turns out better than expected.

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

gld-etf-market-timing-chart-2016-07-01-close

Gold continues skyward, but be cautious about chasing it. Buy pullbacks.

4. U.S. 10 Year Treasury Note Yield (TNX): We’ve had a bounce off the prior major low, yes, but rates could be pulled still lower as rates abroad drop even more.  This is NOT a good thing in the end, because it means that the economy of the world is becoming addicted to easy money and is not growing of its own accord. 

That said, don’t think that rates will necessarily correct higher and NOT make brand new lows below the 2012 low.  No one thought we’d see negative rates in Europe and we have.

U.S. 10 Year Treasury Note Yield (click chart to enlarge; TNX,TYX,TLT,TBF):

tnx-10-year-treasury-note-market-timing-chart-2016-07-01-close

Rates plunge post-Brexit and bounce from 2012 low…for now…

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

Be sure to visit the website for more general investing knowledge 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 July 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, federal reserve, gold, investment, investor sentiment, large cap stocks, S&P 500 Index, small cap stocks, Treasuries | Tagged , , , , , , , , , , , , , , , , | Leave a comment

Market Timing Brief™ for the 6-24-2016 Close (6-30-2016 UPDATE): SP500 Takes a Brexit Hit. Gold Spikes as Rates Retest Prior Low and Bounce.

A Market Timing Report based on the 6-24-2016 Close, published Sunday June 26th, 2016

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

UPDATE 6-30-2016 after the close:  Now that we’ve reached the realm of the target I had in mind for this bounce (see Twitter/StockTwits links below), what do our market timing parameters tell us?

1. As just tweeted, the rise in the SP500 Index has been a bit too fast.  Fast up often leads to fast down or at least to a correction.

2. What does the volatility index say?  Is there room for fear to fall much?  Yes, as you see below the VIX has room to fall further (the blue haze represents a plot of the Bollinger Bands for the VIX, which gives us an idea of the potential movement in both directions):

vix-volatility-index-market-timing-chart-2016-06-30-close

Room to fall further even if there is a pullback.

3.  Given the whippy move in the markets over the past 3 days in our climb from the first Brexit low (see that here: Hard Bounce UP, I would lean toward there being some sort of correction of at least 1/3 to up to 2/3’s of the rise we’ve seen.  That said, I believe a 2/3’s correction would bring us back to prior lows or lower.  The market is a bit jittery still.

If you are Bearish, now’s the time to scale out of some exposure and then scale out of more if we should go still higher. 

Remember that the VIX tells us there is room for fear to fall, which means the conversion of more Bears to Bulls.  Investors have not fully calmed their nerves yet, which can propel the market higher.  It also means that they are overly sensitive to negative news cropping up around Brexit. 

Conclusion: Given the rapid ascent, my favored scenario would be a 1/3rd pullback followed by a push to prior highs.  Check my exposure levels on the social media feeds (links below), and consider how you will adjust yours in way that fits your own investing/trading plan and your beliefs about the market and economy.

Returning to my comments that preceded the Monday slide…

1.  SP500 Index: There is no way to do market timing of certain events such as Brexit, which was unexpected by most of the market, but we could have had and did have positions that hedged our stocks such as a large gold as well as a large bond exposure through municipal bonds.  We also were not overly leveraged to stocks. 

Both gold and bonds rallied as stocks fell hard after Brexit (the referendum for the UK  to exit the EU) was passed in favor of the “leave the EU” crowd.  The British Parliament still must ratify the results of the referendum.  The Brits have committed temporary financial suicide in exiting the EU which is likely to impose some level of punitive damages upon the U.K. as it seeks to renegotiate the terms of its trade agreements with the European continent.  It has to make up for the financial losses of the UK’s prior contribution to the EU. 

I expect a lot of jawboning this week particularly from our Fed, which just can’t seem to keep it’s mouth shut in the first place.  Fed blabbing is far too tempting at this point as the markets could spin further out of control.

Votes are being collected for a re-referendum in the UK.  After all, fair is fair and the Brexit crowd was already threatening to demand a redo vote prior to the completion of this week’s Brexit vote, as they were anticipating losing the 1st battle.

This is the problem with referenda: they amount to the abdication of leadership by those chosen to lead, or I suppose you could call it giving up their power in favor of the people, who are swayed by the emotions of fear and greed.  Would you seriously want the average voter to decide on a nation’s trade agreements and immigration policy, when they have not even studied the issues in detail?  Some do obviously, but in the US at the Federal level there is no such thing as a referendum for this precise reason.  The majority very often wants to rule in its own favor, despite the consequences to the nation both economically and ethically.

What we can expect is greater uncertainty for months to years in Europe, so risk is now elevated for more downside stock market action, but the inherent momentum of those slowing economies was probably enough to bring them down over time in any case.  This was simply the market’s excuse to accelerate another fall.

Shorting markets that have just fallen a good way is fraught with difficulty too as is deploying our excess cash too quickly.  We’ll be patient and see if the SP500 Index 2020 to 2026 band of support works for the Bulls as we attempt to market time the next low as best we can.  If it does not, I believe we can expect far more pain before this move ends.  If we buy more at any given level, we will save some cash in case prices get even better.

SP500 Large Cap Index (click chart to enlarge; SPX, SPY):  read below the chart for next support…

sp500-index-market-timing-chart-2016-06-24-close

It must hold nearby support or expect much more downside.

Survey Says!  Sentiment this week among individual investors (AAII.com) showed a Bull minus Bear percentage spread at minus 13.2% this past Wednesday (Bulls 22.0%% and Bears 35.20% with Neutrals a Bullish 42.8%% [over 40% Neutrals is Bullish for market timing 6 months out]).  It will be interesting to see what damage Brexit has done to U.S. investor confidence.  This survey was concluded the evening before the Brexit vote started coming in.

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

2. I repeat: U.S. Small caps are STILL above the 1040.47 level that for me defines a Bear market transition point.   Time will tell whether the small caps will head back into Bear market territory, but given their lack of earnings, we are staying clear of them.  

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

rut-small cap-index-market-timing-chart-2016-06-24-close

Small caps will fall farther than large on the way down. That’s how it works. It’s called “beta.”

3. Gold: Gold broke up and out and can make further progress, but I would expect some consolidation (sideways move) over a few days.  Note the green arrows by the big green volume spikes and you’ll see why I say that. 

I’m glad we stuck with our gold and gold stock positions despite the press saying that Brexit was going to be defeated (see Twitter/StockTwits feeds at the links). The dollar moved up with gold as it does normally during financial panic.  Thank you gold for doing your job for us!

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

gld-gold-etf-market-timing-chart-2016-06-24-close

Gold shines when there is financial panic, and we were ready for it.

4. U.S. 10 Year Treasury Note Yield (TNX): We saw yet another retest of the lows following the British vote, but things will look far worse to the Treasury and equity markets if we arrive at new lows, so keep track of the 10 Year Yield this week!  Remember that rates RISE in a solid economy.  Well, you can forget a July rate hike by the Fed now.  It’s off the table.  New lows in yields mean more economic trouble is possible.

U.S. 10 Year Treasury Note Yield (click chart to enlarge; TNX,TYX,TLT,TBF):

tnx-10-year-treasury-note-market-timing-chart-2016-06-24-close

Bouncing again from the prior lows. We’ll watch for lower lows.

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

Be sure to visit the website for more general investing knowledge 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 July 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, federal reserve, gold, investment, investor sentiment, large cap stocks, S&P 500 Index, small cap stocks, Treasuries | Tagged , , , , , , , , , , , , , , , , , ,

Market Timing Brief™ for the 6-17-2016 Close: SP500 Faltering in the Range as the Fed Loses Power. Gold Strong Despite Rate Bounce Off Low.

A Market Timing Report based on the 6-17-2016 Close, published Sunday June 19th, 2016

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

1.  SP500 Index: If you want to do market timing, the first thing you have to have a beat on is the Federal Reserve.  The Fed FOMC statements resemble a word game in which some words are introduced and others are added each month to say something very similar from meeting to meeting or something completely different, the latter of which tends to shock the markets.  My comments follow the changes below…

The summary statement is that the Fed has lost its power to influence the economy any further.  Whatever they might do at this point to open the spigots further would be destructive.

Don’t worry.  The Charts are just below the Fed comments. Be patient, as it is worth your time to understand what the market is reacting to in some detail.

Here are the changes in the Fed Statement that were made since the last meeting:

BOLD BLACK = NEW ADDED

RED = OLD REMOVED

Information received since the Federal Open Market Committee met in April indicates that the pace of improvement in the labor market [conditions have improved further even as] has slowed while growth in economic activity appears to have [slowed] picked up.

We have to do market timing around these paradoxes.  This is remarkable!  It’s the reverse of what we had last time.  We are employing more people, while producing less.  It’s no wonder productivity is on the decline, which in turn is a bad substrate for rising wages and consumption. 

Although the unemployment rate has declined, job gains have diminished. Growth in household spending [moderated, although households’ real income has risen at a solid rate and consumer sentiment remains high] has strengthened.

Pluses: More are employed and spending is higher.

Since the beginning of the year, the housing sector has [improved further] continued to improve and the drag from net exports appears to have lessened,

Both pluses.

but business fixed investment [and net exports have] has been soft.

Minus.  Businesses invest in themselves when there is growth in the economy. 

[A range of recent indicators, including strong job gains, points to additional strengthening of the labor market.]

Minus.  See below.  The last line of my excerpt shows that the Fed believes the slowing in employment growth is transitory.

Inflation has continued to run below the Committee’s 2 percent longer-run objective, partly reflecting earlier declines in energy prices and [falling] in prices of non-energy imports.

Dollar strength does that as well as worldwide slowing resulting in deflation.  There is too much production capacity across the world at the moment.

Market-based measures of inflation compensation [remain low] declined;

Not good as it indicates deflationary pressure.

most survey-based measures of longer-term inflation expectations are little changed, on balance, in recent months.

The Fed thinks the “market” is wrong and inflation expectations matter more than the bets being placed on Wall Street and in Chicago.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee currently expects that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace and labor market indicators will [continue to] strengthen.

Slowing employment gains = “It’s transitory.”  That’s the Fed’s mantra for everything they don’t like.

Here is the tough medicine for all Fed heads (and the gridlocked Congress!): You are NOT supposed to be running the economy.  The economy is supposed to run itself, and there is supposed to be some contribution from our gridlocked government in the form of conservative fiscal policies that aid in the formation of companies that will create completely new products.  But because you have interfered at an unprecedented level and imagined yourselves as the all-powerful creators of the economy, the economy has now been overstimulated past the needs and desires of consumers for its goods on a worldwide basis.

For this reason, the economy is now slowing and the economic cycle is about to turn on you, the thoughtless interest thieves that you are.  You have stolen from more conservative investors, the savers who generally have less, and have given the money to relative risk takers, who on average had more, but now the game is up as you are driving the entire banking and insurance industries into the dust beneath your egotistical feet.  (This is not a vote against capitalism, but rather, for the belief that everyone should benefit from our economic success.  My Dad who passed away in December ran a great small business in which he took care of his workers as well as his own family.  We should follow that same model for the country.)

That concludes my message to the Fed.  I know I should really state my opinion in a stronger way.  ;)  They seriously need to have someone or something wake them up! 

Now let me explain why very low rates are toxic over long periods of time.  It’s because banks and insurance companies make money off the spread between the cost of borrowing money and the return on loaning out that money.   Many have already made long term promises to investors to return 5% per year as is common in the insurance industry.  How long can they keep that up with the yield on the 30 year US Treasury Bond at 2.432% this week?  When do they simply go bust?

What’s the good news?  Due to the exact same misguided policies of the Fed discussed above, we can expect that the markets will be LESS likely to sell off immediately, and I expect, or guesstimate that the market could still rally with the expected intermittent corrections to an even higher level than that already achieved.  It could be that we only rise a few percent above the prior ALL TIME HIGH and then collapse into a true Bear market.  In any case, we are staying long the U.S. for now. 

SP500 Large Cap Index (click chart to enlarge; SPX, SPY):  read below the chart for next support…

sp500-index-market-timing-chart-2016-06-17-close

Can the Bulls hold this level?

Survey Says!  Sentiment still supports the Bulls.  Sentiment this week among individual investors (AAII.com) showed a Bull minus Bear percentage spread at MINUS 12.15% this past Wednesday (Bulls 25.35%% and Bears 37.50% with Neutrals a Bullish 37.15%%).  There is clearly room for this to expand, but as we saw very unenthusiastic interest in the market near the prior high, there is room for Bears and Neutrals to convert if given reasons to do so.  Perhaps it will be the failure of Brexit to be passed in the UK that helps the Bulls grow their ranks. 

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

2. I repeat: U.S. Small caps are STILL above the 1040.47 level that for me defines a Bear market transition point.   The trend is still up but another higher high is needed!  Your risk will be higher here in small caps if the market decides to test lower instead of higher.  That’s right, you are in the middle of a range now.  It is difficult to market time the middle of a range.  That is why we prefer to buy off the lows and let go of some exposure near highs.  I see SP500 of 2020 as the nearby support.  For RUT, support is around 1109.  Earnings have been so poor over the past year for small caps in particular that they are likely range-bound at best.  We’ll stick to mid caps and large caps.

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

rut-small cap-index-market-timing-chart-2016-06-17-close

Small caps have made progress but unlikely to have earnings to support a big move.

3. Gold: Gold initially swooned after the Fed as Treasury rates reversed from the prior low.  I expect gold can continue its rally in the midst of negative interest rates abroad and exceedingly low rates in the U.S., but it must take out that 123.96 level and then 125.58. 

UPDATE 6-20-16: The immediate challenge to gold is the dissipation of financial panic over Brexit this morning.  The dollar and gold move up together in financial panic and down together when it lessens.  The continuation of negative interest rates abroad and low rates in the U.S. will provide support for a further gold rally despite this “set back.”  Note that any reversal of those policies will make thing tough on gold. 

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

gld-gold-etf-market-timing-chart-2016-06-17-close

Testing 123.96 right now. Bounced back after initial swoon.

4. U.S. 10 Year Treasury Note Yield (TNX): No negative rates yet thank you, says the Treasury market.  The Fed kept rates steady vs. negative rates abroad, which is why there was a retest of the prior major low.

U.S. 10 Year Treasury Note Yield (click chart to enlarge; TNX,TYX,TLT,TBF):

tnx-10-year-treasury-note-market-timing-chart-2016-06-17-close

Rates bounce off the prior major low.

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

Be sure to visit the website for more general investing knowledge 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 July 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, federal reserve, gold, investment, investor sentiment, large cap stocks, S&P 500 Index, small cap stocks, Treasuries | Tagged , , , , , , , , , , , , , , , , , ,

Market Timing Brief™ for the 6-10-2016 Close: SP500 Being Tested by the Rest of the World. Gold Reviving as Rates Plunge.

A Market Timing Report based on the 6-10-2016 Close, published Sunday June 4th, 2016

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

1.  SP500 Index: The sluggish recovery we’ve had since 2009 is becoming even more sluggish.  In the wake of a big U.S. unit labor cost increase as well as a reduction in productivity recorded in this week’s economic statistics and a decent 94.3 Consumer Confidence number, the SP500 Index may be headed into a test.  Economic productivity is falling, which cannot support wage increases, yet labor costs are rising quickly due to lower unemployment.  Businesses cannot hire workers from the general pool, when that pool does not have the required skills.  There is a big mismatch that has to be made up for through education.  High consumer confidence is certainly good, but may also indicate that the economic cycle is about to turn.  Despite these pressures, the index remains above the yellow trend line shown below. 

Perhaps the “muddle through” slow growth levels we’re witnessing around the world can sustain the U.S. rally a bit further; however, the big declines in the rest of the world’s stock markets on Friday are not what you want to see in the backdrop and are a cautionary sign.  They were certainly a big drag for the US markets on Friday. 

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

sp500-index-market-timing-chart-2016-06-10-close

Testing a top.

Survey Says!  Sentiment still supports the Bulls.  We are near a high and the sentiment spread is a big ZERO.  Sentiment this week among individual investors (AAII.com) showed a Bull minus Bear percentage spread at +0.0% this past Wednesday (Bulls 27.8% and Bears 27.8% with Neutrals a Bullish 44.3%; Neutral Scores > 40 are Bullish for markets rising 6 months out.). 

Sentiment alone suggests that this rally is not over.  Sure there could be another correction, but big Bull markets don’t end with flat sentiment near tops, unless it’s different this time, which it rarely is.

Please 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 are STILL above the 1040.47 level that for me defines a Bear market transition point.  See last week’s post on the larger view of things.  The trend is still up.  So far, this is just a back-test, which enables rallies to continue.  Remember that if this turns into a deeper correction, the losses among small caps will be much greater than for large (small caps are higher beta stocks).

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

rut-small cap-index-market-timing-chart-2016-06-10-close

Small caps made a higher low and a higher high. Only a lower low would shift the trend.

3. Gold: Gold is reviving and was even up WITH the U.S. dollar at the end of the week, which is one of the defining features of financial panic.  Something to watch closely if it continues.  The panic resulted with rates crashed further in Germany and Japan last week dragging U.S. Treasuries down with them.  A further breakout will add lots of fuel to the gold rally if it happens.  It will also tell you that the market believes that Fed rate hikes are a dream for now. 

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

gld-gold-etf-market-timing-chart-2016-06-10-close

Gold revives and rises even as the US dollar strengthens, a sign of panic.

4. U.S. 10 Year Treasury Note Yield (TNX): Rates broke lower still with the crash of yields abroad.  Will U.S. yields follow the rest of the world into the negative?  I personally hope not, as the implications of that would not be good.

U.S. 10 Year Treasury Note Yield (click chart to enlarge; TNX,TYX,TLT,TBF):

tnx-10-year-treasury-note-market-timing-chart-2016-06-10-close

Rates crash.

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

Be sure to visit the website for more general investing knowledge 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 July 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, federal reserve, gold, investment, investor sentiment, large cap stocks, S&P 500 Index, small cap stocks, Treasuries | Tagged , , , , , , , , , , , , , , , , , , , , , ,