A Market Timing Report based on the 7-18-2014 Close, published Sunday July 20, 2014

The SP500 Index was repelled from the upper yellow channel line and is currently above the lower channel line shown.  The Bulls have a shot to achieve more gains, but must now push the index to a brand new high in the midst of wars in the Ukraine and the Middle East and earnings both good and not so good and a housing slow down that is now well documented.

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

SP500 Index forming a lower high. A new high is needed by the Bulls.

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Gold (GLD) attempted a breakout the other day and failed and is still below the prior breakdown point.  As tweeted earlier this week, I believe that the weakness in the face of the Ukrainian plane downing is negative for the near term.  We still hold our long term GLD exposure, but have no trading position currently (to access all of our market allocations, please click the link above).

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

GLD is still below the prior breakdown point.

The 10 Year Treasury interest rate (TNX, tracked by TLT if Bullish; TBT if Bearish) would seem to be low enough for the Federal Reserve to be happy.  The fact that they simply keep pushing them lower is absurd and irresponsible.  As Stanely Druckenmiller pointed out last week at the CNBC conference, the Fed’s actions could turn out to be benign,, but since there is a risk of unintended consequences, there is reason to suspect more harm than good may come from continuing to support the current artificially low interest rates.

Here’s the chart (click to enlarge):

10 Year Treasury on support. Can rates go still lower?

CONCLUSION: Stocks have some work to prove themselves having recently failed at the upper channel line, but the trend for now is UP.  The gold rally faces the possibility of rising rates which will drive a U.S. dollar rally thereby pressuring gold.

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