Market Timing Brief for 09-21-2012: Levitating Markets

Based on the 9-21-2012 Close published Sunday Sept. 23rd, 2012

UPDATE for 9-28-2012: Many indices bounced up in their down trend patterns yesterday and are resuming their downward moves today as the US Dollar strengthens.  The key market timing signals are clear.  The US Dollar is now challenging a new breakout point (@11:34 am; UUP).  If it rises above there (21.93 for UUP),  both stocks and metals will correct (SPX, SPY, GLD).   GLD, the gold ETF, rechallenged the prior high after dropping out of the consolidation in a dramatic way on 9-26-2012. 

I have more to say, but here is where the gold ETF is:

Market timing GLD: Gold ETF Stuck Below Resistance After A Great Run

Gold Stuck Below Resistance After A Great Run

I believe still, as I tweeted yesterday, that this GLD gold ETF pattern is similar to that of around 9-08-2011, and the next move is more likely a correction in the up trend rather than a new high.  If a new high occurs, let me make it clear that I will be buying it.  In market timing, when you are wrong, you must accept that you are wrong and be willing to change your mind.

9-26-2012 Chart Update at the Close:


SP500 Index is now correcting and close to testing the breakout above the April 2011 high.

UPDATE for 9-25-2012: Today the SP500 Index (SPX,SPY) is still sloshing around the recent consolidation band (sideways move) and it looks as though there is plenty of room on the chart for a pullback, even if brief.  The index could either fall back to 1422.38 and retest the last major breakout or go still lower to either the 50 day moving average or to the prior up trend line at 1377.  This would then allow for a year-end rally.

Lots of breakouts and by the stretch in some of the strongest charts, a bit of panic buying that may not last!  I’ll get to a few examples in this issue and mention one sector that may be turning around and present a reasonable buying point.

Biotech broke out again and since the breakout has taken off like a rocket.    It has more than tripled since the 2009 low. 

The SP500 Index has held onto the recent breakout as this week’s chart shows, although it has been in a consolidation (sideways move) over the past 6 trading days. 

The chart of the SP500 Index shows the big jump here:

The Dow Transports are a concern for the market, because they are now testing the bottom range of their support.  It could be because commodities including oil have had some strength recently.  And of course, there is the slowing of the world economy.  We really need to get some trade going with other planets!  This world is just not big enough any more.

Another negative sign is the testing below the breakout point for banking stocks (BKX, XLF).  Retests of this kind don’t always fail, but they are a sign of caution.  If the break persists, I’d consider taking some profits in banking stocks if I had them.  The other important player, housing remains strong though making brand new highs this week (HGX, ITB).  I tweeted my buy of ITB at short term support last week for those of you who follow me on Twitter (link is below).   The index is stretched, so it’s more of a trade than a buy this week and it’s a higher risk entry point for sure.

The last negative that stands out is the failure of small cap stocks to scale the May 2011 high.  It does not mean it cannot happen without a significant pullback, but the risk of such a pullback went up.  The Midcaps (MDX, MDY) failed a breakout which is also negative, so some warning signs are creeping into the technicals.  

Gold is being recognized as more of a currency than a commodity.  Deutsche Bank analysts said this week that “While it is included in the commodities basket, it is in fact a medium of exchange and one that is officially recognized – if not publicly used as such.”  “We see gold as an officially recognized form of money for one primary reason: it is widely held by most of the world’s larger central banks as a component of reserves.”

The issue for gold near term at least is that the US Dollar Index (USDX, UUP) smells like a headwind for gold and commodities.  In fact, I upgraded the US dollar index to a Bull 1.  The US Dollar Index has found some support and has turned up enough to raise concern for a dollar rally, concern that is for holders of anything other than dollars and that includes gold.  Now this may just be a mild correction or something greater.  Longer term, the fundamentals still are sound for gold and bad for US dollars.

GLD Gold ETF Chart:

Gold mining stocks (GDX, HUI) have recovered more than half of what they had lost in the prior pullback.  That is some performance, which is of course based upon gold’s performance.

Treasuries are falling in yield and rising in price, which may at this point be saying that rates are responding to the Fed’s action.  It looks like the 10 Year Treasury Note could test the 50 day moving average at least before bouncing.  As long as rates stay roughly in the recent trading range, stocks will do well.  Rates going too high would make stocks look very unattractive.

Have a look here at where Treasuries are headed: The Bonus Chart of the Week:

Sentiment hardly moved at all this week and still supports a further rally just as it did last week.  Investor sentiment by AAII shows the Bulls and Bears are at a spread (subtracting Bears from Bulls) of +3.7% barely changing from +3.5% last week.  The Bulls are only at 37.5% this week vs. 36.46% last week and could move all the way to 46%ish before the rally ends.  Sentiment is clearly NOT in the way.

The VIX volatility index (VIX, VXX) is testing the August lows.  As mentioned in the past few issues, it must fall below 13.30 for the Bulls to really bring out the party hats.

Utilities had a nice reversal from the recent breakdown and may be a good buy here.  You’ll get slightly better prices than I got.  A break of this level should not be held however.  I will exit if it does.  The risk?  Expensive energy is the risk.  If the oil rally revives itself, utilities could come under additional pressure.

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

The above is the text from the 9-21-2012  “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, housing, investment, Market timing, S&P 500 Index, trading, Treasuries, US Dollar Index, volatility index and tagged , , , , , , , , , . Bookmark the permalink.

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