Market Timing Brief™ for Stocks, Gold and the US dollar: Stocks Rising from Consolidation. Gold Steady.

Market Timing Brief™ for 7-19-2011

7-20-2011 NOTE: Latest on Gold is Here: GLD Tracker™

1. The SP500 index (SPX; SPY) is bouncing today based on good new home building data, but this is not the way the housing bubble will be cured. You cannot fix an issue created by oversupply based on bad debt by building more inventory. That means this could be a flash in the pan rally. The test is this: look for a close over 1317.70. That would indicate some more bounce potential. A close below there will represent a bump up within a consolidation (sideways) pattern.

For those of you who have seen my latest SP500 tracking newsletter video, you know that yesterday, we went down and tested the red line represented by the April low. This means that we cannot yet rule out a further bounce entirely, but the first real strength that will PROVE a bounce is the close over 1317.70.

Key trading point: Buying before we close or at least hold over 1317.70 would not make sense from a trading/technical standpoint.

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NOTE AFTER CLOSE: (4:24 pm) The SP500 Index did manage to show real strength today and this becomes a possible bounce point. Next point of strength would be a move over 1332.28, then 1344.07, and then 1356.48. The 1344.07 high is critical because there was a false breakout above there in early July that led to the recent decline.

2. Gold (GLD, IAU) and silver (SLV) are consolidating within a rally. Try to avoid jumping at the first blip down and selling, but DO maintain some level of profit on your trade. Profits come and go quickly with the latest government policy changes. Europe is still under pressure today with European banks failing the latest rounds of stress tests.

Key trading point: Don’t be shaken out too easily. The trend looks OK. Continue to buy as you accrue profits rather than buy all at once. Set a mental stop on exactly where you will get out. I detail this philosophy here: The Must Ask Questions Before You Buy Bookmark it and go through it every time you buy a stock, ETF, mutual fund, really anything.

3. The US dollar index (USDX; DXY index) is still in an ascending triangle and is vibrating along the 50 day moving average, trading above and below it for the past month or so.

I pointed out the tops that have to be breached to the upside to get another rally going in earnest. Look at the 6 month chart. You can see it here: MarketWatch: US Dollar Index Chart

Key trading points: A move in the UUP above 21.61 would be bullish, but we’ll have to then get through 21.86 to really fly.

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