Market Timing Brief™: Dr. B. Is Up the Creek with the Greeks

Based on the 6-15-2012 Close published Sunday, 6-17-2012.

UPDATE 6-21-2012 – The Volatility Index Chart indicates that the SP500 Index still has room to rally even if it then pulls back. See the chart for yourself here: Volatility Index Chart – Market Timing the SP500 Index

UPDATE 6-18-2012: The SP500 Index stopped dead at the 50 day moving average as if on cue today.  It was up only 0.14% after the Greek people decided to take austerity on the chin.  At least that was the implication.  The reaction to the harsh reality they chose may be different.

The market may be on hold until Weds. pm when the Federal Reserve makes it’s policy statement.  We may simply see a lateral move until the reaction comes.  Remember that the first reaction to a Fed statement is not always the one that sticks.  I’ll be commenting on Twitter in the interim (Twitter feed is to the right on this page and of course you can follow @SunAndStormInv using the button to the right as well.

Now for my comments on Sunday (subscribe using the link below):

The Greeks have chosen a bailout.  That is supposed to be positive, but our futures are up only slightly so far.  I have put quite a bit of technical detail on the website this week (see links below or on the “Read My Feed” page).  The SP500 Index (SPX, SPY) must continue up from here having barely sustained a breakout on Friday.  The 50 day moving average is first resistance, so watch the response there.  It could be telling.  The VIX volatility index (VXX)  is on support and could go either way on a technical market timing basis.

Gold (GLD), silver (SLV) and other metals should continue to rally.  If not, the world will be saying that it is not really sure that the Central Banks will act in any definitive way.  Our Fed meets this week for a 2 day meeting ending on Wednesday, June 20th.  As I mentioned on the site, if their answer is too wishy-washy, the metals will crack back to nearest support in a hurry.

Biotech made it back above the 50 day moving average and looks very strong.  Oil stocks have some momentum coming off their recent low.

Treasuries are not convinced of this whole save Europe and save the world thing.  Yields have crashed and banks continue to penalize savers with correspondingly lower and lower rates of return.  The Fed has of course intentionally created this low rate world by force.  Ironically, the fact that yields are lower than the Fed needs them to be is due to the fact that Fed policy is NOT working to stimulate job growth, which they have as a second mandate beyond controlling inflation.  That has to be one of the most misguided bestowals of power on a governmental body (and technically the Fed is NOT part of the government and is on paper owned by its member banks, which it then stuffs with the cash of savers.)

Until 10 year rates (TNX) go UP to reasonable levels above the 2011 then the 2008 lows, do not believe this save the world thing has been completed successfully.  Dr. B is really a bit stuck here, because he’s been trying to drive down rates to keep housing from imploding.  Now that rates are abnormally low, he really does not want them lower.  What would be the point?  Raising them would scare the markets to death at this time anyway.  He’s stuck.  So understand that he has been printing money and buying back our debt (Treasuries) to bring rates down, not drive them up.  They are down already!!!  He would not be very popular if he took our hard cash and gave it to Europe outright either.  Germany is supposed to be the financial Superman over there, not us.  I’ll bet the German people are pretty upset by that role.

The point is that fiscal stimulus might be more effective at this point if anything is worth doing.  Fed action at this point would be suspect as an attempt to shift responsibility and power from Congress to the Fed.  The Fed should not play the role of Superman.  God knows that Dr. B would look damn silly in a cape!  The only reasonable role of the Fed now is to ensure worldwide liquidity of funds, NOT to send money abroad or take unnecessary action at home just to be “doing something.”

As I reported on my “Investor Sentiment page” this week, now ranked #1 on Google for “aaii survey review”:

I expect a rally to continue Monday and then break down, just as occurred last summer.  I am not sure if the Fed will add to the rally or end it.  That is a wrench that could throw off the charts.  Expect a strong negative reaction especially in the metals if the Fed does nothing.  The details on Investor Sentiment are at that link.

If you have not seen them yet, have a look at the charts from this week.

The Bonus Chart of the Week:

SP500 Index:

GLD Gold ETF Chart:

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

The above is the text from the 6-17-2012  “Weekly Wall Street Sun and Storm Report™.  To see the rest of the current issue and this week’s ratings of all 35 markets I follow and receive the newsletter every weekend, subscribe here:

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Copyright © 2012  By Wall Street Sun and Storm Report, LLC All rights reserved.

This entry was posted in gold, gold etf, investment, Market timing, S&P 500 Index, silver, trading and tagged , , , , , , , , . Bookmark the permalink.

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