Market Timing Brief™: Revival of Stocks and Metals. Treasuries Say Nein! Although Merkel Says Ja!

Based on the 6-29-2012 Close published Sunday, 7-01-2012.

UPDATE @ 5:18 pm on 7-02-2012: The SP500 Index managed to close over the 6-19-2012 high but just barely, so the jury is still out.  It does give the Bulls an edge going into tomorrow.  Markets are closing at 1:00 pm ET tomorrow, so perhaps nothing much will happen.  Remember that Europe is open on July 4th and ironically we are NOT independent of Europe in economic terms as we’ve seen by the reaction of our markets to the mess across the pond.

This week’s Brief:  The metals and the indices escaped a potential fall this week, due to increased flexibility on Chancellor Merkel’s part but it does not feel as if the European mess is over by any means.

So where at the metals now?  I pointed out last week exactly where they had to hold and both silver and gold held those lows by Friday as the charts show:

SLV – The Bonus Chart of the Week:

GLD Gold ETF Chart:

Silver actually fell below support and rebounded after Merkel turned on the Euro printing press (EUR/USD).  Remember that silver is more economically sensitive than is gold, so it may fall further if the economies of the world slow more dramatically.  For now it has found support.

A remaining issue for the metals is that the US dollar Index is down but not out (USDX, UUP).  It is still in a Bull trend for the moment.  It must break the mid June low to change that.

Due to remaining details being unresolved in the European Summit solution and also due to slowing of the economy with weaker earnings coming in from auto manufacturers as well as consumer staples companies like P&G, I expect the SP500 Index to drop to at least 1307 again.  That may just be the first stop.

On Friday the SP500 Index closed barely below the 6-19-2012 market timing high of 1363.46, closing at 1362.16.   On Monday, the index will have a chance to show its stuff and make a new recent high or show weakness and fall back to 1307 or so within days.  Seasonality before the holiday this week favors the Bulls (the two days before holidays tend to be bullish).  Tops sometimes take a couple of days to form, so if there is a failure, it may come on Tuesday or Thursday.  The upside SP500 Index market timing target for a push up through this overhead resistance level would be 1415, which was the 5-01-2012 high.  In favor of the Bulls was that the volume on the push up was decent.

Have a look at the SP500 Index (if your browser is open, the page will open up automatically for you) SP500 Index:

The 10 year Treasury has NOT yet voted for the stock markets by selling off, so risk is not entirely “on” here.  They don’t buy Merkel’s compromise as being curative or there would have been a big sell-off in 10 year notes.  But the 30 year Bond has reversed back down, so perhaps the 10 yr will soon follow.

The VIX volatility index has fallen enough that there is plenty of room for it to rise now, although the March low could be the first target, which is lower than Friday’s close.  It would just take another couple days of rallying to get us there and then the market could start easing back again.

If you bought on Friday or if you intend to buy further strength, you may want to set a mental stop, in case Europe fall apart again and the economic slowdown is worse than expected.  Either of those will propel the market down again.  The same zigzagging plagued the market last summer and is likely to continue.

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

The above is the text from the 7-01-2012  “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 Economy, federal reserve, gold, gold etf, investment, Market timing, S&P 500 Index, silver ETF, trading, Treasuries, US Dollar Index, volatility index and tagged , , , , , , , , , . Bookmark the permalink.

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