A Market Timing Report based on the 11-07-2014 Close, published Sunday November 9th, 2014

The SP500 Index has blasted upward from the prior low, a bit too quickly perhaps, but the Republican win of the Senate just made the market go up a little bit more.  You’ll note in the chart below that the rate of upward movement has decelerated however, and I believe a pullback could be imminent.  IF on the other hand the market keeps moving up, we’ll be adding to positions.  Why?  There are a lot of Bulls at the moment, and here is what investor sentiment is saying about that: : AAII Survey Says!

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SP500 Index (SPX, SPY; click the chart to enlarge it): 

SP500 rate of rise is slowing.

The U.S. Small Caps (RUT, IWM):  Russell 2000 U.S. Small Cap Chart (click the chart to enlarge it): The small caps are NOT coming along for the ride to new highs.  They are stuck, as shown below.  This is what we call a negative divergence.

U.S. Small Caps are NOT Coming Along for the Ride to New Highs

Gold failed at support and started a bounce back on Friday most of which happened after I pointed it out on StockTwits® and Twitter® (see links above).  The bounce was up to a prior resistance level, so more is needed or the shorts could just drive down gold again this week.  If stocks sell off and rates fall this week, gold could move up past this block.

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

Gold is bouncing from a dangerous break on the chart.

The 10 Year Treasury interest rate (TNX, tracked by TLT if Bullish; TBT if Bearish): Rates look like they may have peaked again.  I believe they could retest the prior lows if not exceed them to the downside (remember when rates fall, TNX falls and Treasuries rally in price).

Please Click the TNX Chart to enlarge it:

Rates hit the 50 day moving average and declined. More to come?

In summary, I suspect we may see a pullback in the SP500 soon along with a fall in the already stalling small cap stocks.  Gold may rise further as interest rates fall from their recent high.  Rates cannot be going up in the context of a deflating world.  That would work against the Fed Reserve’s mandate and drive the U.S. economy into a recession.

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