Market Timing Brief™: Seven Signs on the Direction for Stocks, Gold, and the US Dollar

Market Timing Tells on the Markets

NOTE ADDED: Friday, 11-18-11 on VIX

1.The SP500 Index (SPX; SPY) is at the lower up trend line of the triangle the SP500 has been in as explained in this week’s video chart.  If we break that line, there will significantly more damage.

2. On a positive note, the housing index barely fell today, down only 0.04%.  The entire market was down on the Fitch report that said US banks were significantly exposed to the Euro Mess.  We already knew that.  But apparently, when the same negative statements are repeated, more people hear them the next time.   Banks were not down quite as much as I expected either (BKX; XLF)

3. Another positive is that the consumer is buying at some places such as Home Depot, while the results at Walmart were not as perky.  I have the feeling it’s going to be a white Christmas for retail however.  US  consumers AND investors are not as focused on Europe as the professionals are.  Perhaps they “should be,” but they are not.

4. The US dollar rally (USDX; UUP) is posing a bit of a threat to multinational earnings strength, but sooner or later the money press will pop out again at the Fed if that trend gets too strong.  The Fed is going to want to manage the dollar index strength within a band and we’re pressing the upper part of the band at this point.

5. Dollar strength means weakness for gold (GLD ETF).  Gold looks like it is turning over at least for a further correction.  The weakness in the Euro may help bring in some gold buying to counteract this.  But realize that as stocks are sold, eventually gold is sold as well, both for liquidity reasons and initially simply due to dollar strength – if the dollar gets too, too strong, gold falls.

6. Emerging markets are sinking.  Look at India (PIN).  It’s what I call a Bear 4 market.  The Chinese market is also turning over again, although it may not fall to the lowest of the recent lows.  The FXI, for example, may stop at the 50 day moving average and bounce.  If it doesn’t, that would be a very negative sign for our markets.  The world functions in unison in the 21st Century and China is a leader.  Shoot the leader and the rest fall.  (that’s why the generals stay way back in all the wars of course, except for Patton and a few others).

7. The VIX (volatility index) is moving up in the consolidation band it has been in and it has farther to go too.  Watch how it acts at around the 50 day moving average.   It has not held the VIX back, but the VIX reversals have occurred after brief and shallow rises through the 50 day moving average.   That could occur as early as tomorrow morning.

11-18-2011 NOTE:  The VIX in fact went slightly above the 50 day moving average yesterday and is moving back down a bit today.  It could just continue down with any improving Euro mess news, but Bears could point out two things:

There is the potential for a reverse head and shoulders formation on the daily chart, which could cause the VIX to blast up to somewhere beyond the August VIX high (and the SP500 index would be falling hard in unison).  The head would be the August low and the shoulders would be the mid-October low and the November low.

This “blast off” is activated if and when the VIX moves up through the “top” of the formation which is represented by the highs on the daily chart from mid-October on.  It seems more likely that the VIX will drop toward year end.  We could then sell off again, but let’s not get too far ahead of the market!  If Black Friday shopping is strong the Bulls will be emboldened.

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

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