A Market Timing Report based on the 12-27-2013 Close published Sunday December 29th, 2013

The 10 Year Treasury yield has now risen above 3%.  If the yield continues to rise slowly, the stock market and even housing stocks could be OK, but if yields rise rapidly within a week or two to 3.5% for example, the stock markets of the world may react to that move in a negative way, and so would housing and metals.  There is always competition between earnings yields on stocks and yields in Treasuries and bonds.  A slow rise in rates is expected by the market, as I’ve been saying, if the economy is in fact improving.

This means that if corporate earnings are soft for Q4 in the second week of January, stocks could sell off if rates continue higher despite those sluggish earnings.  In the end, we need to follow the markets and not make assumptions, but the above is a general guide to the next few weeks on rates and earnings.  Stocks will have to show rising earnings in the face of rising rates for the stock market rally to continue.

Rising rates did NOT hurt the gold ETF, GLD, this past week.  I’ll tell you why in my new post to the upper right.

Here is the interest rate chart for the 10 Year Treasury Note:

Rates now above prior high and also above 3%.

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