Market Timing Brief for the 7-17-2015 Close: It’s the Same This Time. Small Caps Hesitate with Large Caps On the Line. Gold Breaks. Rates Fall.

A Market Timing Report based on the 7-17-2015 Close, published Sunday July 19th, 2015

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

1. The SP500 Index has rallied from the recent low on very low volume after Greece was “saved” from itself and the rest of the Eurozone came up with the money to fund the bankrupt nation.  It’s not a convincing rally though!  There is immediate resistance at the high of 2129.87 and then resistance at the prior high.  The NASDAQ is at all time highs, yes, even above the highs of the massive 2000 internet driven bubble.  To celebrate, Google (GOOGL) was up a whopping 16.26% on Friday.  How analysts could be so far off is remarkable with a company of that size.

It’s the same this time. Facebook and other companies like it that have been bid up to astronomical levels based on hype, not earnings will meet Mr. Market’s “reversion to the mean” law one day.  Facebook is now trading at a multiple of Enterprise Value (EV) to EBITDA of 37.33 vs. the 10.16  value for Apple.  A value of approximately 10 is considered “a deal.”  (EV is the amount of money it would cost to buy the company outright [all shares, plus debt, minus cash] and EBITDA, which eliminates accounting adjustments to earnings, is earnings before adjustments of interest, taxes, depreciation and amortization).  By another measure, price to sales, FB is trading at 18.89 X sales, which Apple trades at 3.49 X sales.  All this data can be found on Yahoo! Finance for FB and for APPL (click the links to view).

The Current SP500 Index Chart (SPX, SPX; click to enlarge): Barely above the bright green trend line with small caps much weaker.


Large Caps just barely above a resistance line.

2. Small caps did not participate as vigorously as their larger brethren on this bounce.  That is a strike against this rally.

Russell 2000 U.S. Small Cap Index (RUT, IWM; click to enlarge):


Small caps lag.

3. Gold looks miserable. Gold stocks, seen HERE, are even worse.

Gold ETF (GLD): We hold GLD as currency insurance only, and it won’t help that we have until the dollar weakens on Fed dovishness.  Right now, the U.S. Fed policy is more hawkish than that of other important central banks.  For this reason, we have no trade on for GLD at the moment.


Gold is broken and has one last trend line support level shown in yellow.

4. Bond and Treasury yields are finally falling a bit back into the range shown on the chart below.

U.S. 10 Year Treasury Note (TNX,TYX,TLT,TBF): The yield on the 10 Year must break 2.198% to reverse the current trend of higher highs and higher lows.


Rates falling again.

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