Market Timing Update: Value Stocks Leading Growth Stocks Down

Market Timing Brief for 8-2-2011:

UPDATE AT CLOSE 8-2-2011: There was a rush into the following today in order of performance on a % basis: silver (SLV), 20+ year US Treasuries (TLT), gold (GLD), Swiss Francs (FXF), gold and silver miners (GDX; SIL), 10 year US Treasuries (IEF), municipal bonds (PZA), corporate bonds (LQD), commodities (DJP), short term bonds (BSV), and the US dollar (UUP). All the other indices I follow on my screen were down. The metals were helped a lot by the fact that the dollar was not being particularly favored. Treasuries were.

1. The SP500 Index: The index is headed to a full test of the March-July lows. If that fails, my target becomes 1219.80.

We have an economy that will just barely grow without massive help and now we have politicians who will not spend. This is a recipe for deflation.

Treasuries are issuing a warning sign. They are skyrocketing at a time that the US dollar is still sluggish. This sort of move has not been seen since 2008. The drop last year was related to the Fed’s activities. The Fed is not in the market to the same extent now that QE2 is over. This is money moving to safety and it is doing it quickly. But panic serves no purpose. Define your plan.

What to do? If you have sold nothing, you could see if the March-June lows hold or exit part of your positions and be willing to rebuy higher if needed. Selling late is hard I realize. That’s why I publish daily and even intraday at times.

Value is Leading Growth Downhill: Warren Buffett’s stock does poorly when the economy slows substantially, because many of his companies lack great prospects for growth without growth in the overall economy. Look at the comparison of large cap growth (IWF) to large cap value stocks (IWD) in this chart: Value Stocks are Leading Growth Stocks Down

2. Gold: The gold ETF (GLD) is making new highs still. It is not lunging up, but it IS moving up slowly. The gold chart is even stronger than the silver chart, although silver is moving up today as well. I reported progress on my gold tracking page: Take a look at the chart today: GLD ETF Chart

3. The US Dollar: Is hanging in there, now flirting with the July 1 low of 21.19 for the UUP, US Dollar Index ETF. The dollar recently recovered from a prior plunge below the June low and with the stock market selling off, has a shot at holding its own. The post-debt deal rally is NOT impressive though, so gold is currently looking better. If you see the relative strength of the dollar pick up, gold will suffer of course.

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Standard Disclaimer: Remember, it’s your money and your decision as to how to invest it.