A Market Timing Report based on the 7-03-2014 Close, published Sunday July 6, 2014

The SP500 Index has hit and, although it’s difficult to see, it has slightly exceeded its upper channel.  The last bump up occurred after Federal Reserve Chair Janet Yellen said she did not believe stocks were in a bubble.  Although investors may continue to bid shares higher, earnings reports for Q2 are about to begin and could provide the impetus for lower stock prices.  One can argue that adding to your U.S. stock positions here may not prove to be the best entry point.  What could change this?  If earnings are strong and forecasts are also strong in the upcoming earnings reports, stocks could grind higher.  Employment is improving, and although the quality of jobs is somewhat limited, this does help consumer spending to improve and may provide enough growth to allow the market to at least go sideways for a while.

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

SP500 Index stretched above channel line.

Gold (GLD) is holding up well, but could still correct.  The last small breakout was lost this past week, but the pullback has been minimal thus far.  We are still in our trading GLD position of the size given on the “WSSSR™ Access” page  (see link above).

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

Gold is holding up fairly well, but has lost some momentum.

The 10 Year Treasury Interest rate (TNX, tracked by TLT if Bullish; TBT if Bearish) is rising at the moment within the channel it’s been in .  The Fed has every intention of keeping it there for the foreseeable future, but eventually the bond market will lead the Fed.  It always has eventually done so, and it will this time.

Here’s the chart (click to enlarge):

10 Year Treasury Yield is rising again.

CONCLUSION:  Stocks are stretched and overdue for a correction.  The gold trend is still up, and it’s early in the move.  Still, GLD could correct back to the top red line and still maintain an up trend.  Why should it pull back?  Because rates are rising and the dollar is strengthening, which is a headwind for gold.

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