A Market Timing Report based on the 11-13-2015 Close, published Sunday Nov. 15th, 2015
I deliver focused comments on the markets. These are supplemented with “Tweets/StockTwits” (see links below).
We must stand in solidarity with the French people following the Paris attacks, but at the same time, we must remain conscious in regard to our investments.
1. SP500 Index: The world is now in crisis-response mode, and we have to face the possible effects of this on the economy. Despite the fact that those visiting shopping malls in smaller cities around the nation may feel safe, those in larger cities may not, following the 3 terrorist attacks by ISIL on Russia (the plane downing), Lebanon (two bombings) and now Paris that were fairly sophisticated in terms of planning. This could effect consumer behavior including the willingness to board planes depending on the destination. A rate hike by the Federal Reserve may be pushed off into the future in light of the further slowing that could occur.
We are already in a war with ISIL according to the President, despite the administration’s willingness to pursue it entirely from the air and with a few advisors. It really depends on whether the rhetoric changes whether this starts to feel like more of a war. After 911 which this resembles for France, our market dropped 4.92% after a week of cleanup on Wall Street. This is not likely going to be taken with quite the same level of fear in the U.S., so the losses may be lighter than that; however, I believe we’ll hit the targets I shared on Twitter/StockTwits last week in short order (1990-2008). 2020.86 was immediate support, but that was lost afterhours on Friday after the Paris attacks.
Fortunately, we’ve lightened up a bit and have extra cash to buy at lower prices. If some of you read my calls and became more liquid than I did, that is great (I’ve gone from 135% of usual maximum equity exposure worldwide back in February 2015 to 94% as of Friday).
2. Small caps have reversed the prior breakout. They are again a “sell” in my opinion.
Russell 2000 U.S. Small Cap Index (RUT, IWM; click to enlarge):
3. Gold is on its knees. The unrest in the world may drive it up for a while. We’ll know soon when trading begins. If you buy here, you must use a stop, and I’d go further to say that if gold does not pop when trading opens tonight, the prospects for it are not good until rates fall and the Fed backs off.
Gold ETF (GLD; click to enlarge):
4. 10 Year Treasury Note Yield: I’ll stick to what I said last week with an added dose of concern over the world’s economy slowing given the terrorism fears that have now been heightened and are likely to weigh on commerce. Longer term, UNLESS the Fed is actually behind on inflation (doubtful), rates should DROP again.
The wild card however is OIL! If there is fear about oil supplies being compromised in the Middle East, and oil prices start to rise, watch out, because inflation will rise and push core inflation higher over time. This is the reverse of what’s been happening on the way down for oil. That would put the Fed in a box with higher inflation and slower growth, none other than stagflation.
U.S. 10 Year Treasury Note Yield (TNX,TYX,TLT,TBF):
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