Market Timing Brief™: Treasuries Did Not Budge. So is this Stock Market Rally for Real?

Market Timing Brief™ for 10-18-2011

Treasuries did not budge today. If this stock rally is for real, they should have shot up in yield, down in price. Other sectors were listless. Why wasn’t biotech rallying today? The VIX is also not supportive yet of a continued rally, so today could be as much of a fluke as Monday was when the market is selling off. Understand that technical analysis AND fundamental analysis gets a bit riskier when governments are playing games as they are. But it still pays to pay attention to the signals. It’s important to realize that the noise is higher, so you either have to set somewhat wider stops to stay in or get back in if you get out too soon. It is a very tough investing environment.

Open up this chart before continuing so you can see where we were at the close today on 10-19-2011: SP500 Index Market Timing Chart

Why did the markets sell off sharply twice at about 1230 for the SPX (SP500 Index) if this is really an all clear signal that a 2 trillion dollar fund will be created in Europe? Maybe it’s not so certain after all. Jim Cramer said last night that a technical analyst he follows changed his technical opinion from sell to buy based on the 2 trillion Euro rescue package. That makes no sense. The chart has to show a breakout above the prior 1230 high on the SP500 Index to confirm a shift of this market to a “range free” as opposed to a range bound market. Fundamentals do not matter UNTIL they effect the technical picture. And they have not, because we don’t have that new high in place yet. It could happen, but it has not happened.

The Dow roared up to the last top – again. It has to punch through to convince me that there will be more. Banks did the same thing (BKX). They are up near resistance on the chart.

Oil is doing fine, but it’s about to run into resistance at the September tops. The XOI had the first day of a breakout. Commodities overall just treaded water. Gold pulled back 0.48% (GLD shares). It was down much bigger earlier in the day. I think adding to gold positions now makes sense, because Europe is about to continue the destruction of its currency, but scale in slowly and decide where you will sell if gold dives through recent support. The US Dollar Index looks like it could hold onto the recent rally. This could challenge gold unless there is wholesale dumping of Euros and a flight to both the US Dollar Index and to gold.

A plus for the overall stock market is that banking and housing are acting better and making progress with the market. If they turn back down, so will the overall market.

I’ll be sharing these sorts of thoughts here and on the main website (links under “Publishing Schedule” tab above).

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My update from this eveningis here: Market Timing Brief

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