Market Timing Update: Is the SP500 Index Topping? Will They Sell the News?

Market Timing Brief for 7-26-2011

1. The SP500 index (SPX; SPY): The index has topped and is in risk of correcting further as I go over in the SP500Tracker™ today:

SP500 Index Tracking Newsletter

I put some Practical Pointers in the above report, but one critical pointer is that the market may see the news of a debt ceiling settlement as a “sell on the news” sort of event. The rally we saw after the President encouraged investors on 7-19 was the relief rally. Now the selling has resumed in anticipation of the announcement. If we rally instead, I’ve outlined the trading/investing parameters at the above link.

2. Gold (GLD, IAU) and silver (SLV) are barely moving today with gold down (GLD) 0.06% and SLV up 0.46%. That is an unusual relationship in that gold is generally positive when silver is. I do not see the metals making huge progress with the debt ceiling agreement in the wings. Any resolution of the debt issue in the absence of other European instability will bring on a correction in the metals possibly with a failed breakout for gold. The 39.69 level is resistance for SLV (see yesterday’s post on this blog as well).

Practical Investing/Trading Pointers: See yesterday’s comments. Unchanged.

3. The U.S. dollar index (ETF: UUP; U.S. dollar index USDX; DXY) is headed back to the April low. The break of the ascending triangle base that I wrote about last week finished the rally.

Practical Investing/Trading Pointers: Since a deal is likely imminent (days away at most), the US dollar will probably see a relief rally with gold and silver selling off with stocks.

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