Market Timing Brief for the 6-12-2015 Close: Weakness in Stocks and Gold. Rates Finally Ease a Bit.

A Market Timing Report based on the 6-12-2015 Close, published Sunday June 14th, 2015

I deliver focused comments on the markets.  These are supplemented with “Tweets/StockTwits” (see links below).

UPDATE 6-18-2015 11:40 am

The Fed held interest rates steady this week, but Dr. Yellen indicated that a rate increase was likely in the second half of the year (see my Twitter comments to right).  The economy has clearly slowed in the U.S. with a negative GDP, which means negative growth, in Q1 and Q2 is not looking good either.  The Fed expects the second half of the year to save GDP for the year, seeing it now 0.5% lower than before at 1.8-2.0% (central tendency as they call it).

I think we’ll be trading up and down until the data tell us which way the economy is going and when we see if there is any response by the Fed.  If the Fed simply raises rates despite extreme sluggishness in the economy, the SP500 will sell off significantly (at least a 10% correction for a Fed error).  The Fed acts as though it won’t matter when they raise interest rates off zero, because the trajectory of rates will be slow, but the bond market is not as certain of that.  The U.S. stock market (plus Europe mainly) is strong following the Fed meeting, but just above resistance as the chart shows.  The current economic data are not strong enough to warrant new highs in the SP500 Index, but if market participants believe the Fed’s 2015 recovery scenario for the second half, the stock market may lead the economy to the upside and pull off another strong year.  Growth had better appear stronger by September (end of Q3):

sp500-index-market-timing-chart-2015-06-18-1139am

Up and over or do we pause here?

And now back to the prior blog post with details on recent economic figures:

Retail sales minus gas/autos were just slightly better than the 0.5% expected at 0.7% month over month, and 1.2% vs. 1.3% expected with gas/autos included (per Bloomberg News).  Investor sentiment showed Bears climbing in numbers with only 20.04% Bulls, 47.38% Neutral, and 32.58% Bears, with a spread of -12.54% (Bulls-Bears; from AAII.com).  That spread number does not auger well for gains, even if they come.  They are likely to be given back into or during the next earnings season, unless forward guidance is strongly positive to make up for the slow start to this fiscal year.  Be advised that sometimes strong rallies appear at the current Bull-Bear spread, but the gains vanish over a period of months after achieved.  The high neutral readings we’ve been seeing for weeks are positive for a point 6 months out as I’ve explained HERE.

The short term looks “iffy,” but the Bulls will likely prevail in time as the world muddles through the current slowdown.  Fed uncertainty continues to be a cloud over the market.  Will they raise in September or not?  How much?  Once and done or will there be a series of raises that might force the economy into recession?  Markets despise uncertainty and often reflect it with sloppy, more volatile trading (ups and downs).

SP500 Index Chart (SPX, SPY): (Please click to enlarge it)  Weak with a lower high below the green line shown.  If the market can recover back above the green line quickly, there’s much more hope for a rally, lasting at least a few weeks or months.

SP500 Coming Back Down

SP500 Coming Back Down

Russell 2000 U.S. Small Cap Index (RUT, IWM): Small caps just below a significant high too (please click to enlarge).  Moving back above the green line would be very Bullish.

rut-small-cap-index-market-timing-chart-2015-06-12-close

Small caps topped out too for a bit?

Gold ETF (GLD): Holding as currency insurance only.  No trade currently.

gld-gold-etf-market-timing-chart-2015-06-12-close

Gold remains in range, going no where for now, but with technical and fundamental support.

U.S. 10 Year Treasury Note (TNX,TYX,TLT,TBF): Treasuries finally caught a bid, but we need more follow-through this week!  Needs to stay below that April high of 2.407% (24.00 on the chart below = 2.400%).

(see my messages on Twitter®Follow Me on Twitter®.   Follow Me on StockTwits®).

tnx-10-year-treasury-note-market-timing-chart-2015-06-12-close

Rates finally ease after a long fear driven run up.

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