A Market Timing Report based on the 6-27-2014 Close, published Sunday June 29, 2014

The SP500 Index has recovered from a recent swoon, but has been consolidating for eight market days.  The Bulls will need a brand new high to keep this market moving to our current target of 1993 at the upper trend line.  The Bears remain frustrated as even the previously overvalued small caps have regained much of what was lost from the March highs.  This makes zero sense, so I suspect that the re-inflation of small cap stock prices (RUT, IWM) is marking the approximate end of this move.

We’ve been raising some cash and have sold entire index allocations in some cases.  To see my allocations by percentage and pending SELLs, simply subscribe here for free: Free Subscription to My Newsletter and access to My Latest Comments/Strategy.

Here’s the SP500 Index Chart (click to enlarge):

SP500 Consolidating Slightly Above Prior Breakout

Gold (GLD) is holding up well, but could be subject to correction.  Remember that when stocks correct strongly, which they will eventually, and probably sooner rather than later, metals often sell off too, particularly if they have run up with stocks.

The Gold ETF Chart (GLD; click to enlarge the chart):

Gold holding its gains, but is not invulnerable to correction.

The 10 Year Treasury Interest rate (TNX, tracked by TLT if Bullish; TBT if Bearish) is falling again, which is a negative sign for the SP500 Index (click to enlarge):

Rates are falling again.

Why is this a poor prognostic sign?  Because rates are falling due to a very weak GDP report in the first quarter and the belief that the Federal Reserve will slow down their time table of QE reduction and the raising of rates so as to help stimulate a faltering economy that could otherwise deliver poor earnings and raise PE’s even further.  Valuations then come down as the markets sell off a bit. 

Since the Fed is going to likely remain supportive, a huge drop as we saw in 2011 is probably not likely, but we won’t make assumptions, and we’ll have our exits planned.

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