A Market Timing Report based on the 7-31-2015 Close, published Saturday August 1, 2015

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

1. The SP500 Index hesitated after the Fed FOMC statement that referred to “solid job gains” saying specifically, ” The labor market continued to improve, with solid job gains and declining unemployment. On balance, a range of labor market indicators suggests that underutilization of labor resources has diminished since early this year.”  This makes an earlier Fed move possible with a big “BUT.”  The “but” is that the worldwide economy is slowing in the face of deflation.  Added to that was the Employment Cost Index coming in at a very weak 0.2% month/month.  The lack of wage growth has been a likely drag on consumer confidence of late and could restrain retail sales.

Market pausing after the Fed and disappointing employment cost index.

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

2. Small caps found support and as the second chart shows below, have been outperforming the large caps since the October low.  In fact, if you bought small caps at every large cap low, you would have done very well.  Perfect market timing is impossible to achieve, but reducing risk at highs and increasing it at lows (selling and then buying back higher beta) works.

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

Small Caps Bounce from Nearby Support

3. Gold’s Bullish engulfing day from last week did not lead to a rally, at least not yet.  

Gold ETF (GLD):

Gold has found a level, but no rally so far.

4. Treasury yields 

U.S. 10 Year Treasury Note (TNX,TYX,TLT,TBF): The 10 year Treasury has reached a support level, but with the economy cooling, yields have further to fall as the Fed steps back and reassesses their prior view on raising rates as early as September.

Yields continue to fall. Bonds winning.

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