A Market Timing Report based on the 7-25-2014 Close, published Saturday July 26, 2014

The SP500 Index has failed a breakout.  I suspect it will test the red line shown or the 50 day moving average or thereabouts.  Sometimes markets overshoot support levels.  That’s the way they test them.  Reactions to current earnings seem to be positive overall.  Being in the wrong individual stocks has been punished (e.g. AMZN down 9.65% on 7-25.  Stay in the winners and cut losses in the losers or stocks like AMZN that are being valued at still ridiculous levels.  We continue to be relatively underweight the U.S. except for the individual stock positions mentioned on Twitter (they are not part of our “model portfolio”).

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

SP500 Index is faltering and has failed a breakout.

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Gold (GLD) failed a breakout above the top red line shown in the chart below.  I hesitated to re-add a trading gold position on Friday.  The reaction to international turmoil has been lacking.  We will hold our long term position (riding profits only) as gold seems to be finding  buyers above the prior low and there are good reasons to suspect that even as interest rates rise, the real interest rate will remain negative.  That’s good for gold.

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

Gold is still below a breakdown level despite the bounce on 7-25..

The 10 Year Treasury interest rate (TNX, tracked by TLT if Bullish; TBT if Bearish) remains at rise of rising from the current low yields.  As mentioned,, does not help the Fed to keep interest rates this low when somewhat higher rates would be tolerated.

Here’s the chart (click to enlarge):

Rates remain low but are at base of a recent trading range.

CONCLUSION: Stocks should continue to pull back a bit over the next week.  “Dips” to date have been shallow and brief.  We are due for a full three wave correction by now (down, up, down in waves).  Gold seems to be holding up at a higher low, but is not as strong as it “should” be considering the backdrop internationally.  So we’re staying out of our trading position and keeping our long term position.  If you hold cash, you should also hold some gold in my opinion (5% of investable assets is recommended by many advisors).  And hold gold miner shares (a basket of them or ETF, not one) if you expect more from gold than we’ve seen.

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