Market Timing Brief™ for the 7-21-2017 Close: SP500 Index Near All Time High. Gold and Rate Dance May Change Direction Soon.

A Market Timing Report based on the 7-21-2017 Close, published Sunday,  July 23rd, 2017

I deliver focused comments on market timing once or twice a week.  These are supplemented with daily “Tweets/StockTwits” (see links below).

1.  SP500 Index: Companies that had being doing well are holding up through earnings and some that were not doing as well, such as IBM, continue to be troubled.  Thus far, 97 companies have reported Q2 earnings.  This summary shows you where the greatest growth is in both earnings and revenue for the second quarter: HERE 

On the 28th, we’ll get the first estimate of GDP for Q2, which could be between 2% (NY Fed) vs. 2.5% (Atlanta Fed), but don’t bank on those numbers, as they are unreliable historically.  They may get lucky.  A much stronger GDP number than expected will be taken as a positive reading on confidence in the Trump administration, which has been under pressure with the Russia investigation and delayed action on health care.

In market timing terms, the SP500 Index continues to make new highs against a backdrop of investor skepticism, which means there is room for a further rally.  I will continue to stay with this rally until the economy turns, the market timing technicals turn, or both.

Keep up-to-date during the week at Twitter and StockTwits (links below), where a combined 28,868 people are joining in…

Twitter® Follow Me on Twitter®.  Follow Me on StockTwits®.

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

sp500-index-spx-market-timing-chart-2017-07-21-close

New highs after consolidation.

Survey Says!  Sentiment of individual investors (AAII.com) showed a Bull minus Bear percentage spread of  +9.67% vs -1.39% last week.
Bullish sentiment does not generally peak out here and is likely to move to 20-30% before the Bull becomes tired again.

Thurs. 12 am close to poll Bulls               35.48% Neutrals 38.71% Bears      25.81%

2.  U.S. Small Caps: On the negative side, the small caps failed a breakout above a recent high, but on the positive side, they remain well above the orange market timing trigger line we were observing.  My IWM sell on a small pullback turned out to be premature, though my exposure to equities is still quite high.  There was not enough of a drop to make a re-entry IWM trade worthwhile.  It could be that this failed breakout will just be a minor retest of the late April high.  Remember I put my chips in the large caps and mid caps for the longer haul and use the small caps as a trading position.  

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

iwm-russell-2000-etf-market-timing-chart-2017-7-21-close

Small caps fail a breakout but above trigger line.

3. Gold: Gold is moving in the opposite direction of rates.  Keep track of the market timing of rates if you want to know when to exit a trading position in gold.  It’s possible that GLD will reach the April and June highs before this move ends, and the 10 Year Yield will move down to the June low.  It is also possible the 10 Year will respect the orange trigger line and bounce (see below).  Rates are the dog, and gold is the tail, regardless.  I own gold for insurance only, because as the economy improves, rates will rise eventually and pressure gold, which has a yield of zero. 

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

gld-gold-etf-market-timing-chart-2017-07-21-close

Gold in steady up trend with rates in steady downtrend.

4. U.S. 10 Year Treasury Note Yield (TNX): Rates are falling again.  Inflation is still reasonably contained and GDP growth across the world is a bit sluggish.  A stronger economy would lead to higher rates sooner.  The move in rates may be about done here. You can see how rates have respected my market timing “trigger line” a few times already. It’s possible that rates will bob up and down in a fairly low trading range for the next 6 months to a year, perhaps longer. Testing the June low is possible as mentioned above. Remember this decline hurts the financials (XLF).

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

tnx-10-year-treasury-note-market-timing-chart-2017-7-21-close

Rates dropping when the market had been expecting gradually rising rates.

Let’s review the three market timing signals together….

MY SIGNAL SUMMARY for a Further U.S. Stock Market Rally is:

Stock Signal ON, Gold signal ON (good for stocks, not gold), Rate Signal ON (good for stocks, not bonds).

Thank you for reading.  Would you please leave your comments below where it says “Leave a Reply”… or feel free to ask a question…  Pay it forward too by sending the link to MarketTiming.Blog to a relative or friend.  Thank you.

Note: My monthly newsletter is now CLOSED to new subscriptions until late this year.  I’ll let you know here if and when it reopens.

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.

Copyright © 2017 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 7-14-2017 Close: SP500 with New Breakout. Small Caps Hesitate Off High. Gold Bounces to Resistance. Rates Sink Post-Yellen Testimony.

A Market Timing Report based on the 7-14-2017 Close, published Sunday,  July 16th, 2017

I deliver focused comments on market timing once or twice a week.  These are supplemented with daily “Tweets/StockTwits” (see links below).

1.  SP500 Index: The SP500 Index is at new market timing highs, while small caps are above my Bullish “Signal Trigger Line,” but hesitating to break out further.  They may yet come along for the ride.  Rates fell after the Federal Reserve Chair Yellen sounded more dovish on the margin in her testimony before Congress this week, and the banks and financials, which depend on their interest rate margins for income sank.  Inflation as measured by the Consumer Price Index was flat in June month over month and CPI was up 1.6% Y/Y while core CPI was up 1.7% Y/Y.  We are about 2 weeks away from the Q2 GDP 1st estimate results.  The market may be buoyed by positive earnings before then, and continue rallying further based on solid GDP results.  There is a Fed meeting on July 25-26 before GDP on 7-28, but they are not likely to hike again that soon given their comments this past week.

Keep up-to-date during the week at Twitter and StockTwits (links below), where a combined 28,641 people are joining in…

Twitter® Follow Me on Twitter®.  Follow Me on StockTwits®.

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

sp500-index-spx-market-timing-chart-2017-07-14-close

New breakout to upside.

Survey Says!  Sentiment of individual investors (AAII.com) showed a Bull minus Bear percentage spread of  -1.39% vs. -0.28% last week.  Read my comment from last week.  It still applies.  The high neutral rate itself is very positive.

Thurs. 12 am close to poll Bulls               28.24% Neutrals 42.13% Bears      29.63%

2.  U.S. Small Caps: I lightened up my equity exposure on Thursday 7-12-2017 after adding exposure back during the swoon to the low end of the recent market timing trading range on 7-6.  I am using IWM and most recently, QQQ put selling to make some trading profits, because the beta and therefore the extent of the swings up and down for these indexes is higher than for the SPY for example.  The failure to break up through the green line noted in the chart below is a negative.  I will likely add back some small cap exposure if we achieve another breakout.  Note the volume decline on the narrow price rise over the past three days, also a negative.

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

iwm-russell-2000-etf-market-timing-chart-2017-7-14-close

Failed breakout. Need a breakout soon to keep the upward momentum.

3. Gold: Last time I reported here, rates were rising and gold was falling and now we have the reverse going on in market timing terms.  A breakout above the orange line, and because it is close by, a second breakout above the aqua line will spell a real change of character for gold.  Note that GLD rose and tested the prior up trend line from below and pulled back a bit.  That itself is a possible short set-up (with a stop), but the fact that the May low held is a positive working against that.  We have a trading range until the previously mentioned breakouts occur.

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

gld-gold-etf-market-timing-chart-2017-07-14-close

Gold subject to interest rates as usual.

4. U.S. 10 Year Treasury Note Yield (TNX): Rates fell on the recent dovish Federal Reserve comments although they remain above my “Market Timing Signal Trigger Line” (orange line in chart below).  I believe if earnings remain solid (banks were so so on Fri.) as we head into the main part of earnings season, rates could test around the April or May lows to create a reverse head and shoulders formation, and then rally again.  Fiscal stimulus may be required to drive rates back above that green line on an intermediate term basis.  Investment in higher productivity is much better for our economy longer term.

Just providing tax cuts to boost spending is a temporary fix that weakens the nation’s balance sheet in the end.  It is short sighted.  Infrastructure spending could boost productivity a bit, but such moves mean little when compared to innovation and research and development with resulting new products/greater productivity.

But what kind of education do we need? Better education could be along the lines Trump has been pushing to mimic the German Hochschule model, which trains workers with specific skills instead of sending kids off to 4 year Beerfests, would allow for more of the 6 MILLION open jobs to be filled. Students who represent the upper cut of students could attend the “University” system and go on to masters and doctorate degrees.  We are not about to achieve high levels of productivity with an ignorant, unskilled nation, or “Idiocracy,” to borrow a satirical movie title. 

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

Top line reads “Treasury Yield 7-14-2017 Close, Trigger line…”

tnx-10-year-treasury-note-market-timing-chart-2017-7-14-close

Rates falling back toward the orange trigger line.

Let’s review the three market timing signals together….

MY SIGNAL SUMMARY for a Further U.S. Stock Market Rally is:

Stock Signal ON, Gold signal ON (good for stocks, not gold), Rate Signal ON (good for stocks, not bonds).

Thank you for reading.  Would you please leave your comments below where it says “Leave a Reply”… or feel free to ask a question…  Pay it forward too by sending the link to MarketTiming.Blog to a relative or friend.  Thank you.

Note: My monthly newsletter is now CLOSED to new subscriptions until late this year.  I’ll let you know here if and when it reopens.

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.

Copyright © 2017 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 , , , , , , , , , , , , , , , , , | 2 Comments

Market Timing Brief™ for the 7-07-2017 Close: Stocks Recover from Dip. Gold Diving as Rates Climb.

A Market Timing Report based on the 7-07-2017 Close, published Sunday,  July 9th, 2017

I deliver focused comments on market timing once or twice a week.  These are supplemented with daily “Tweets/StockTwits” (see links below).

1.  SP500 Index: North Korea launched what appeared to be an ICBM with a trajectory that could have brought it to Alaska, which unnerved the markets.  I pointed out on StockTwits and Twitter that there is no military solution to the situation, so none was likely.  They all involve catastrophe as the South Koreans as well as our 28,000 troops on the DMZ would be imperiled.  Kim is crazy, but not completely insane.  Trump has insisted that North Korea will never be allowed to have the ability to launch a nuclear missile toward the U.S.  The North Koreans have not yet put together all the ingredients to make that happen, so there is time to work out an agreement with them.  This is not something that can stop the stock market on an immediate basis, which is why I was buying the dip this past week (see the social media links below…).

The jobs report was strong enough this week, and earnings are going to be good this season, so I am staying invested until that picture changes.  Is there risk? Yes, because some company valuations are already stretched, but they are nowhere near 2000 levels.  The key is to maintain a certain level of profits on all your positions as the market climbs.  If you don’t do that, you are falling asleep on your prosperity.  Not a good idea!  Stay aware.

Keep up-to-date during the week at Twitter and StockTwits (links below), where a combined 28,455 people are joining in…

Twitter® Follow Me on Twitter®.  Follow Me on StockTwits®.

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

sp500-index-spx-market-timing-chart-2017-07-07-close

Survived a dip.

Survey Says!  Sentiment of individual investors (AAII.com) showed a Bull minus Bear percentage spread of  -0.28% vs. +2.85% last week.  Amazingly sentiment is stuck in neutral, not too hot or cold.  This is not how a Bull market ends.  There is far too much skepticism for that to happen at this time.

Thurs. 12 am close to poll Bulls               29.58% Neutrals 40.56% Bears      29.86%

2.  U.S. Small Caps: Small caps backtested my orange trigger line this week.  The way it was trading at that lower level was positive, so I bought back half of my prior trading position and also added QQQ large cap tech exposure for the same reasons.  There have been two small cap backtests of the orange trigger line coming up from the last lows.  A third test may not be taken as well however.  Small caps should move up from here based on earnings, or this may turn out to be yet another false breakout above the trigger line.  For now, I’m impressed that the two backtests were passed by the small caps.

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

iwm-russell-2000-etf-market-timing-chart-2017-7-07-close

Backtest succeeded.

3. Gold: Gold is sliding as rates are rising.  Read the comments from last week if you are not up to date.  Gold is heading lower as long as the current interest rate up trend continues.  It may not.  As the Fed raises rates, long rates and inflation may be contained.  If rates stay within a reasonable range, so will gold, despite these recent ups and downs.  For now, gold has broken the recent up trend and will likely trade down to one of the lower support lines noted in the chart below, but should rally in response to the next downturn in interest rates.

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

gld-gold-etf-market-timing-chart-2017-07-07-close

Gold is range bound, but has now broken trend.

4. U.S. 10 Year Treasury Note Yield (TNX): The rate signal for a further stock market rally is also ON.  If the economy is indeed strengthening, rates can still go up at a very slow pace, IF inflation stays low.  This week the Fed will have more inflation data out with PPI on Thursday and the CPI release Friday.  Note how the banks/financials trade with the 10 Year Yield.  Rates are up and banks are up.  Better spreads mean more profits.  If yields pull back again, the financials will also.

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

tnx-10-year-treasury-note-market-timing-chart-2017-7-07-close

Rates are climbing and the signal is ON.

Let’s review the three market timing signals together….

MY SIGNAL SUMMARY for a Further U.S. Stock Market Rally is:

Stock Signal ON, Gold signal ON (good for stocks, not gold), Rate Signal ON (good for stocks, not bonds).

Thank you for reading.  Would you please leave your comments below where it says “Leave a Reply”… or feel free to ask a question…  Pay it forward too by sending the link to MarketTiming.Blog to a relative or friend.  Thank you.

Note: My monthly newsletter is now CLOSED to new subscriptions until late this year.  I’ll let you know here if and when it reopens.

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.

Copyright © 2017 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 6-30-2017 Close: Stocks Consolidating. Gold Hesitating. Rates Rallying.

A Market Timing Report based on the 6-30-2017 Close, published Sunday,  July 2nd, 2017

I deliver focused comments on market timing once or twice a week.  These are supplemented with daily “Tweets/StockTwits” (see links below).

1.  SP500 Index: The economic data continue to be good and stocks are consolidating in a range.  Follow the bouncing ball.  If the SP500 breaks down below the lower yellow line (see chart below), the odds are good in my view that the green line will be broken in the market timing chart below.  As said previously, if that is broken, we’ll be heading to the red line at a minimum.   Earnings will have to bear out the guesses at GDP that say we’ll see a fairly strong number in the July 28th report roughly in the range of 2.5-3.0%.  The New York Fed only sees 1.9% while the Atlanta Fed’s guess is 2.7%.  They are often wildly wrong, but it gives us a rough guide.  The Fed is likely to hike rates slowly if growth is in fact below 2%.  Earnings will be starting with Pepsi (PEP) on July 11th, which will provide more data on the economy’s performance in Q2.

It’s interesting that the Federal Reserve is not expected to raise rates, even in September with the CME saying the odds are just 12.8% that rates will be bumped up to a 1.25-1.50% target in September 2017 from the current 1.00-1.25% target range.  I believe the Federal Reserve WILL raise rates in September if GDP turns out to be in excess of 2.5% for the second quarter.  Why?  Because it gives them an excuse to normalize rates, which is their intention.  If the economy is booming, rates should gradually increase to match the increase in inflation, and the Fed is supposed to stay ahead of that curve to prevent dislocations in the economy.

Keep up-to-date during the week at Twitter and StockTwits (links below), where a combined 28,293 people are joining in…

Twitter® Follow Me on Twitter®.  Follow Me on StockTwits®.

Review the chart…

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

sp500-index-spx-market-timing-chart-2017-06-30-close

Stocks hesitating in a range.

Survey Says!  Sentiment of individual investors (AAII.com) showed a Bull minus Bear percentage spread of  +2.85% vs. +3.74% last week.  Note the surge in “Neutrals” by about 5% in a week, which means there is a high likelihood of higher SP500 Index prices in 6 months.  This is the strongest predictor of market performance that AAII has.  It could be many months before the Bears score a win, short of an outside event such as a Trump impeachment (not likely based on current information).

Thurs. 12 am close to poll Bulls               29.71% Neutrals 43.43% Bears      26.86%

2.  U.S. Small Caps: Our market timing “Stock Signal” is still on as you can see. The small caps remain above the orange trigger line shown in the chart below.  This is the time for them to prove that strength is real by taking out the prior all time market timing high of 142.90.

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

iwm-russell-2000-etf-market-timing-chart-2017-06-30-close

Small caps holding up well despite the tech swoon.

3. Gold: The gold market timing signal is ON, and gold is headed down to test an up trend line. Note that the prior up trend became a possible top with the double top forming at about 123.07.

Still, as long as gold can maintain higher lows, that double top is not insurmountable.  The sticking point for gold will likely be strength in the economy accompanied by slowly rising rates.  This provides competition for gold.  The prime driver for gold is the real rate of return available in other competing assets like stocks and bonds.  Review the factors driving gold up and crushing it: “When Does Gold Shine and When Does it Decline?”

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

gld-vs-tnx-market-timing-chart-2017-06-30-close

Gold has been weak with rates now rising.

4. U.S. 10 Year Treasury Note Yield (TNX): One week changed things.  Rates have shot up past that market timing trigger line (orange line in chart below).  Banks responded by immediately rallying.  XLF was up 2.71% in just the 4 days since rates started rising again.  There will be more gains, IF rates continue climbing.  Some say inflation will be tame, so rates will collapse again.  Others say inflation will pick up with the economy.  Take your pick.  Or just follow the charts.

Note that rates are testing about the same area vs. the 50 day moving average back in May and then fell.  If rates continue upward from here, that would define “a new behavior” for rates, meaning expectations have shifted.  If the Fed keeps raising the Fed Funds rate gradually, they may be able to sustain the recovery for many more months however.  Then you will see rates stay in a reasonably low range (below 3% longer term).  If tax cuts and other fiscal stimulus creates too much inflation in the economy, the 10 year rate will move much higher than 3% (up to 4 or 5% or more; in the mid 1990’s rates spiked above 8% for comparison), and we’ll head into the next recession as the corporate debt overhang comes knocking. A recession is an event worth selling for…

Now let’s review the three market timing signals together….

MY SIGNAL SUMMARY for a Further U.S. Stock Market Rally is:

Stock Signal ON, Gold signal ON (good for stocks, not gold), Rate Signal ON (good for stocks, not bonds).

U.S. 10 Year Treasury Note Yield (click chart to enlarge; TNX, IEF, TYX,TLT,TBF): (ignore the SP500 label)

tnx-10-year-treasury-note-market-timing-chart-2017-06-30-close

Rates shoot up and drive banks up.

Thank you for reading.  Would you please leave your comments below where it says “Leave a Reply”… or feel free to ask a question…  Pay it forward too by sending the link to MarketTiming.Blog to a relative or friend.  Thank you.

Note: My monthly newsletter is now CLOSED to new subscriptions until late this year.  I’ll let you know here if and when it reopens.

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.

Copyright © 2017 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 , , , , , , , , , , , , , , , | 2 Comments

Market Timing Brief™ for the 6-23-2017 Close (Update 6-26-2017): There’s Room for a 5.4% Stock Market Correction. Gold Bounces. Rates Stay Low.

A Market Timing Report based on the 6-23-2017 Close, published Sunday,  June 25, 2017

I deliver focused comments on market timing once or twice a week.  These are supplemented with daily “Tweets/StockTwits” (see links below).

1.  SP500 Index: After the Federal Reserve raised the Fed Funds rate by 0.25% on June 14th, we’ve had a failed market timing breakout to new highs, and the index is back to where it was at the close just after the Fed statement. Employment is improving steadily, inflation as the Fed measures it is below 2% and they see it a bit lower for the year vs. their prior assessment, and the economy is chugging along at around 2% growth, but far below the 3-4% growth the Trump administration has said is their target.

What about valuation?  You can look up the Shiller PE Ratio (CAPE) HERE and see at 29.87 we’re back at the 1987 peak level and above the valuations seen in 2007 before the Great Recession, but still well below the 2000 peak of around 44.  This means that the market is already expensive, but could become more so if interest rates stay low enough AND if economic growth continues.  Remember, over the short run, which can be several years, PE ratios can be way out of whack, but over the longer term, stock prices follow earnings, whether up or down.  The current earnings momentum for the overall economy is UP.  For this reason, I am remaining long with more exposure than I usually have.

The healthcare system is still not working for a lot of people and it’s a very mixed picture.  For example, I know “wealthy people” who cannot get a policy covering basic care without paying a fortune. Oddly enough, one can honestly say unfortunately AND fortunately for those who need affordable healthcare, it appears the Republicans will after a period of haggling with holdouts, eventually be able to move forward the healthcare bill, now being offered up in the Senate as the “Better Care Reconciliation Act.”  As it stands, both the House and Senate bills will drive up the independent market cost of healthcare for people ages 50-64 by 4-8 times current pricing depending on the source you review.  There are groups who are being hurt pre-legislation and others who will be hurt post-legislation.

Many current Medicaid patients will be displaced into the private insurance sector supported by tax credits.  What they will end up with is up for debate.  Insurers are likely to limit the coverage of “essentials” for these patients to lower costs of coverage.  Remember that our system creates a good deal of waste because of the insurance company middleman which takes its cut.  Without real competition to drive down costs of providing care, the net effect is that our country delivers less care for more money.  The net effect on the healthcare system could be pronounced for the healthcare legislation losers, which will likely include the hospitals, so I would decide NOW what level of profits you want to maintain on our XLV Healthcare ETF and IBB Biotech trades.  Don’t give it all back.  It’s very hard to predict what this moving target of a healthcare bill will mean in the end for the net healthcare provided.  Follow the market timing signals in the market, rather than the news.

There are other landmines ahead for healthcare.   Trump is supposed to deliver on his promise of cutting drug prices in the near future.  This could slash our gains as the impact sets in, despite the recent big run up in drug and biotech company prices.  The rise has been almost straight up for a few days in a row, as though investors believe Trump’s words and actions will be relatively inconsequential.  If not, watch out below.

What about the current SP500 market timing chart?  If the lower yellow line in the chart below is broken, it is possible that we’ll only backtest the 2400.98 breakout, but that is not likely in my view.  Then IF we break the green line, the target becomes the red line, which would mean a 5.4% correction from the intraday all time high on 6-19-2017.   The highest fliers would be hit by deeper corrections unless their fundamentals are clearly superior to the market.

Keep up-to-date during the week at Twitter and StockTwits (links below), where a combined 28,080 people are joining in…

Twitter® Follow Me on Twitter®.  Follow Me on StockTwits®.

Review the chart below…

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

sp500-index-spx-market-timing-chart-2017-06-23-close

Failed breakout.

 

Survey Says!  Sentiment of individual investors (AAII.com) showed a Bull minus Bear percentage spread of  +3.74% vs +2.79% last week.  The numbers barely budged vs. last week, so please review the comments via the link to the upper right for the issue on the 6-16-2017 close.

Thurs. 12 am close to poll Bulls               32.65% Neutrals 38.44% Bears      28.91%

2.  U.S. Small Caps: Our market timing “Stock Signal” is still on, despite the recent “Tech Swoon,” and Fed meeting.  The ETF is still above the orange trigger line shown in the chart below.  I believe a reversal of this signal could mean a full correction in the stock market to that “red line” discussed above.  

Small Cap Update 6-26-2017: Note the distinct difference in behavior during the last retest of the “orange trigger line” vs. the prior retests that failed.  There were two prior breakouts above the line that failed.  This one did not.  That is very positive for a continued rally in small caps.  The index needs to keep marching to a new high to verify this of course, but the odds have changed for more upside. Today the index is lagging the SP500 Index as I post this comment, but still +0.31%, but we’ll have to watch this trade.  Another failure and we’ll be headed at least back to that lower red line or worse.  This does set up a decent trade.  If you enter around here, you could cut your losses on a close below or on a decisive move through the orange line to the downside.

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

iwm-russell-2000-etf-market-timing-chart-2017-06-23-close

Small caps holding above the prior breakout, but barely above the May high.

3. Gold: The gold market timing signal is ON, which is technically bad for gold and good for stocks.  That said, gold is in a bit of a bounce.  I’m interested in seeing if the bounce can take us above the horizontal orange and aqua lines on the chart below, because if it can, the Bulls will be back in charge.  If the economy keeps improving with low inflation, gold will tend to lag. 

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

gld-vs-tnx-market-timing-chart-2017-06-23-close

Attempting a bounce from a higher low?

4. U.S. 10 Year Treasury Note Yield (TNX): Rates remain low following the Fed’s increase in the Fed Funds Rate by 0.25% on June 14th.  The Fed’s own inflation estimate for 2017 was DECREASED at the meeting, and if inflation holds steady, rates may not need to rise much.  This should result in delays for further Fed rate increases.  This would mean the returns on bonds may not lose much due to loss of principle value.  Now let’s review the three market timing signals together….

MY SIGNAL SUMMARY for a Further U.S. Stock Market Rally is:

Stock Signal ON, Gold signal ON (good for stocks, not gold), Rate Signal OFF (good for bonds).

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

tnx-10-year-treasury-note-market-timing-chart-2017-06-23-close

Notice how rates are still staying low after the Fed hike?

Thank you for reading.  Would you please leave your comments below where it says “Leave a Reply”… or feel free to ask a question…  Pay it forward too by sending the link to MarketTiming.Blog to a relative or friend.  Thank you.

Note: My monthly newsletter is now CLOSED to new subscriptions until late this year.  I’ll let you know here if and when it reopens.

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.

Copyright © 2017 By Wall Street Sun and Storm Report, LLC All rights reserved.

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

Market Timing Brief™ for the 6-16-2017 Close: Bulls Still In Charge Despite Tech Dip. Large Value Leads with Small Growth in Rear Since Fed. Gold eases. Rates Still Tame.

A Market Timing Report based on the 6-16-2017 Close, published Sunday,  June 18, 2017

I deliver focused comments on market timing once or twice a week.  These are supplemented with daily “Tweets/StockTwits” (see links below).

1.  SP500 Index: What did the Fed do?  They raised rates 0.25% as expected, but took a hawkish stance according to some, but in fact the Fed lowered their median PCE Core inflation expectation for 2017 from 1.9 to 1.7% and left 2018 and 2019 unchanged at 2.0%.  So maybe they are not so hawkish after all.  Read the dot plot info at this PDF Link from the FOMC).  They currently expect very little additional growth in 2017 over 2016 and a slight DECLINE in real GDP growth going into 2018-2019.  I guess they don’t believe in the power behind Trump’s policies yet, but that could change.

What I observed after the Weds. 2 pm Federal Reserve statement release was a market timing outperformance of value over growth in both the small and large cap ETFs as well as an initial outperformance of small over large caps.  The latter has since reversed as the following chart shows. Note also small growth is now at the bottom (from Fed Statement Weds. up to 6-16-2017 close):

sp500-index-vs-iwf-iwd-iwm-iwo-iwn-market-timing-chart-2016-06-16-close

Value beats growth since the Fed statement was released.

Keep up-to-date during the week at Twitter and StockTwits (links below), where a combined 27,838 people are joining in…

Twitter® Follow Me on Twitter®.  Follow Me on StockTwits®.

Now let’s take a longer market timing point of view.  Look at what the small caps (IWM, IWO, IWN), midcaps (IJH), and large caps (IWF, SP500, IWD) have done since the February 11, 2016 low. The small caps are all bunched up near the top of the chart, large growth (yellow) beat large value which tracked with the SP500 Index.  IJH, the midcaps (purple line) performed at a level between large and small caps.  Large growth IWF (yellow line) somewhat bettered the large value stocks. 

sp500-index-vs-iwf-iwd-iwm-iwo-iwn-since-2016-02-11-low-market-timing-chart-2016-06-16-close

Longer term winners are the small caps.

Now let’s look at the SP500 Index chart and see where we are after the large tech swoon of the past several trading days.  Large caps vibrated in a range ABOVE the last breakout.  That is very positive.  This further proves my point last week that there was a rotation going on between large cap tech and large cap value stocks.  Whether this persists at all is unclear.

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

sp500-index-spx-market-timing-chart-2017-06-16-close

Still above last breakout.

If growth continues as the Federal Reserve believes it will, growth stocks should not simply collapse from here.  Amazon buying out Whole Foods suggests that the biggest winners are not done continuing to win.  Often when a company buys out another company the buyer’s stock falls, but not so with Amazon which was the best performing of the FAANGM stocks (FB, AMZN, AAPL, NFLX, GOOGL, MFST) stocks as shown on this chart I posted HERE.

Survey Says!  Sentiment of individual investors (AAII.com) showed a Bull minus Bear percentage spread of  +2.79% vs. +5.90% last week.  It’s remarkable that the percentage of Bears did not increase (they actually fell very small amount) after the techs swooned on the prior Friday.  Investors have been piling into bond funds and ETFs near stock market highs.  That is NOT how a Bull market ends, so that would indicate more upside before the Bull fades from sight.  We could have a correction given negative news flow from the Trump administration.  Go back and review my comparison to the Clinton impeachment period if you believe there is zero short term risk to the market. Note that I have not brought down my exposure level, because I still feel with a Republican controlled House, it would require a high burden of proof to impeach the president. 

I don’t like the way the President is handling the investigation.  Instead of cheering on the investigators to clean house for him, President Trump is locking horns with the entire intelligence community and criticizing Special Prosecutor Mueller.  He would get far more done if he were to get out of his own way.  If he is not guilty, he should do a purge of his administration of any involved in Russian collusion and be done with it, so the Congress can focus on the business of the people. Let’s get on with tax and healthcare reform.

Thurs. 12 am close to poll Bulls               32.27% Neutrals 38.25% Bears      29.48%

2.  U.S. Small Caps: Small caps triggered the “Stock Market Timing Signal” to ON, and it remains on despite the Big Tech swoon, which is impressive.  We can still test the orange line and survive (see chart), but we should not break it again, or we may be retesting the bottom of the previous range (133.12ish) or worse.

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

iwm-russell-2000-etf-market-timing-chart-2017-06-16-close

Small caps hold onto breakout.

3. Gold: The “Rate Signal” is OFF, and despite that, gold is selling off.  Gold initially rallied right after the Fed statement, but then when it became clear the Fed was leaning hawkish, gold fell a bit.  If rates stay as low as they are now (below the orange line in the rate chart below), or head lower, gold could well rise again.  Gold should not fall apart while rates are falling, because negative real interest rates are what gold loves. 

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

gld-vs-tnx-market-timing-chart-2017-06-16-close

Gold slipping despite rate signal being OFF.

4. U.S. 10 Year Treasury Note Yield (TNX): Rates did NOT spike much after the Federal Reserve FOMC Statement was released.  They raised the Fed Funds rate by 0.25% as expected, but continued to believe that more rate hikes are necessary than the market foresees for 2017.  Remember the 10 Year Yield fell after each of the prior two Fed hikes.  This time, as mentioned above, they lowered their median inflation expectations.  Review the data for yourself via the PDF link I posted above.

The Fed has started talking about rolling off their $4.5 Trillion balance sheet.  If the Fed does start reducing its purchases of US long dated Treasuries, I expect rates at the long end to creep up as they also continue slowly raising the short end via the Fed Funds rate.

Overall, significant inflation is not rearing its ugly head in a big way, despite the fact that some costs like rent have jumped quite a bit over the past few years. 

What if inflation remains as subdued as it is now?  Bonds and Treasuries could trade sideways and if the economy does pick up steam as expected, the stock market will do very well and gold will suffer to the extent that real returns are better elsewhere.  Gold remains a form of currency insurance for me and I have no gold trade on at this time.

MY SIGNAL SUMMARY for a Further U.S. Stock Market Rally is:

Stock Signal ON, Gold signal ON (good for stocks, not gold), Rate Signal OFF (good for bonds).

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

tnx-10-year-treasury-note-market-timing-chart-2017-06-16-close

Rates stay below trigger post-Fed statement.

Thank you for reading.  Would you please leave your comments below where it says “Leave a Reply”… or feel free to ask a question…  Pay it forward too by sending the link to MarketTiming.Blog to a relative or friend.  Thank you.

Note: My monthly newsletter is now CLOSED to new subscriptions until late this year.  I’ll let you know here if and when it reopens.

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.

Copyright © 2017 By Wall Street Sun and Storm Report, LLC All rights reserved.

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

Market Timing Brief™ for the 6-09-2017 Close: Rotate! Big Cap Tech Sells Off with Rotation into Mid to Small Caps and from Growth to Value. Gold Sinks As Rates Rise.

A Market Timing Report based on the 6-09-2017 Close, published Sunday,  June 11, 2017

I deliver focused comments on market timing once or twice a week.  These are supplemented with daily “Tweets/StockTwits” (see links below).

1.  SP500 Index: A “Bearish engulfing pattern” is a market timing pattern in which the price on a given day makes a higher high and a lower low and closes near the low.  The pattern on Friday in the midst of strong profit taking in Big Tech names did NOT qualify as such a pattern, as the SP500 Index was nearly unchanged for the day.  There was a higher high and a lower low, but the close was at 0.08% for the day. 

Rallies in energy (XLE), financials (XLF), materials (XLB), healthcare (XLV), and industrials (XLI) balanced out the losses in other sectors, but primarily in tech (XLK) at -2.47% vs. the next poorest performer, consumer discretionary (XLY) at -0.44%.  Consumer staples (XLP) were -0.12% and utilities (XLU) -0.09%.

Was that it for the tech sell-off?  The technicals suggest there is room for a bounce early next week ahead of the Fed’s action on Wednesday, which will be to raise rates by another 0.25% to a target range of 1.00-1.25% per CME stats that say the odds are 99.6%.

It’s what the Federal Reserve says in its FOMC statement out at 2:00 pm this Weds. about future rate hikes that could make a difference to the markets, along with the dog and pony show at 2:30 pm ET.  Current projections are for stronger GDP numbers over the current and subsequent quarter or two.  The thing that could hold this back is that businesses had been counting on a successful tax cut package to stimulate growth, but with President Trump mired in trouble over the Russian investigation, visibility has shrunk.  The market does not appreciate political fog, and may this may raise the risk for more than a quick dip in the market.  At the same time, I still expect higher highs in the market before this Bull run is over.  Sentiment is too “mildly Bullish” as you’ll see below to make this a top…

What I observed Friday morning which continued to the close was that money was rotating from Big Tech Growth (QQQ) at – 2.50% for the day to midcaps (IJH) +0.37% and small caps (IWM) +0.52%.  As said, the SP500 Index was only -0.08% for the day.

There was also a rotation from growth to value across the board, even among the large caps.  There could be some further rotation from large cap tech growth stocks into small and midcap stocks and even to large caps with better value.  On Friday SCHG (Schwab Large Cap Growth) was -0.89%, while SCHV (Schwab Large Cap Value) was +0.54%.  This was also true among small caps with IWO (Small Growth) DOWN 0.43% and IWN (Small Value) UP a big 1.38%. 

Again, that’s not a “market sell-off”; it’s a market timing rotation from Big to Mid and Small and from Growth to Value. 

Keep up-to-date during the week at Twitter and StockTwits (links below), where a combined 27,674 people are joining in…

Twitter® Follow Me on Twitter®.  Follow Me on StockTwits®.

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

sp500-index-spx-market-timing-chart-2017-06-09-close

SP500 still near all time high.

Survey Says!  Sentiment of individual investors (AAII.com) showed a Bull minus Bear percentage spread of  +5.90% vs -4.62% vs last week.  Tops don’t look like this!  There’s more Bull Market to come, even if we see a Trump-based correction.  I personally sense that it will be hard to prove anything against Trump if there are no recordings as it’s simply Comey’s word against his.  Furthermore, the Republicans control the House, which would have to impeach Trump to kick him out, as a sitting President cannot be indicted by a prosecutor, as indictment was felt by the founders to be an easy way to disrupt and destabilize the government.  There would have to be incontrovertible evidence of obstruction of justice for impeachment by the House and then trial by the Republican Senate to convict.

The only pause I have is that the former Federal prosecutor from New York, Preet Bharara said on MSNBC today that no one can conclude yet whether there IS or IS NOT sufficient evidence for obstruction of justice by Trump.  We’ll have to wait and see.  Waiting is NOT something the market enjoys…

Thurs. 12 am close to poll Bulls               35.43% Neutrals 35.04% Bears      29.53%

2.  U.S. Small Caps: Small caps triggered the “Stock Market Timing Signal” to ON, but will have to quickly make a brand new high above the green line in the chart below to confirm the “rotation” was more than a one day thought.  Remember too that in a healthy rally, all indices tend to rise together, even if some under-perform others.

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

iwm-russell-2000-etf-market-timing-chart-2017-06-09-close

Small caps win in the rotation from large to smaller (IJH and IWM) on Friday.

3. Gold: The “Rate Signal” (see TNX below) started to flicker at the end of the week.  So did the GLD market timing signal as it was OFF (above trigger) on Tuesday and off by the next day after a failed breakout.  The reaction to the Federal Reserve’s rate hike will depend on the extent of their perceived hawkishness.  What we know regardless is gold sold off after just ONE DAY above my trigger line.  It was a market timing fake-out.  This happened because rates were UP for three days in a row.  Guess what?  Gold was down three days in a row.  If you follow gold, you must follow interest rates!

If we have a tax reform package by August (looking bleaker), rates could continue higher, which generally is bad for gold which yields zero.  A freeze in DC won’t be liked by the stock market, but gold would appreciate it.  DC stagnation could send rates even lower and gold could benefit.  If things work out for Trump, in the short term you’ll see gold move lower, but long term we’ll have TrumpFlation and gold will respond by rallying.  I see gold as currency insurance still for the Trump “giveaway” plan, creating tax cuts we cannot afford.  He’s no fiscal conservative.  He himself says “I love debt!”  It will be tricky to trade gold in the near term, unless you stick very diligently to buying only the oversold levels and then selling the overbought levels such as the one we just had.

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

gld-vs-tnx-market-timing-chart-2017-06-09-close

Gold fails a key breakout.

4. U.S. 10 Year Treasury Note Yield (TNX): As I detailed last week, the Fed’s hikes in December and March have led to LOWER 10 Year Treasury yields.  We can expect the same if the Fed raises rates again as expected by nearly every breathing human economist.  Rates will rise at the longer end if growth picks up and the Fed finds itself behind the curve or if the bond market sees that coming.  The market discounts the future whether it arrives or not!

The 10 Year Yield was “playing with my number,” last week flickering  from OFF to ON on both Thursday and Friday and then falling back below the trigger line (orange line on chart below) to OFF.  Long rates are EVENTUALLY likely to rise a bit as the Fed continues to raise short rates as long as growth continues and the Fed action does not shut growth down prematurely.  They won’t be able to roll off their huge balance sheet if they don’t raise rates.  If the Federal Reserve falls too far behind on rate increases when things are good, they won’t have as much room to act if things turn south in the economy.  It’s quite a balancing act and they actually have little visibility as to the impact of their policy moves.  Their GDP predictions are all over the place vs. reality, nearly worthless in the end.  That is why we follow market timing signals and try to avoid over-analyzing everything else.  Profits matter. Actual printed economic numbers matter, but projections don’t as much!  In the end the market price itself is the great truth teller!  They cannot hide price, volume, or volatility.  It’s all there for us to see.

MY SIGNAL SUMMARY for a Further U.S. Stock Market Rally is:

Stock Signal ON, Gold signal ON (good for stocks, not gold), Rate Signal OFF (good for bonds).

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

tnx-10-year-treasury-note-market-timing-chart-2017-06-09-close

Rate signal back OFF, but barely.

Thank you for reading.  Would you please leave your comments below where it says “Leave a Reply”… or feel free to ask a question…  Pay it forward too by sending the link to MarketTiming.Blog to a relative or friend.  Thank you.

Note: My monthly newsletter is now CLOSED to new subscriptions until late this year.  I’ll let you know here if and when it reopens.

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.

Copyright © 2017 By Wall Street Sun and Storm Report, LLC All rights reserved.

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