A Market Timing Report based on the 1-15-2016 Close, published Monday January 18th, 2016
I deliver focused comments on the markets. These are supplemented with “Tweets/StockTwits” (see links below).
1. SP500 Index: I said “We’ll be back at the Sept. 2015 low if not the Oct. 2014 low fairly soon.” We hit the Sept. low on Friday and bounced. Will that level hold or will we descend to either the August intraday low or the Oct. 2014 low? No one can claim to know, unless they know that the U.S. is undoubtedly going into a recession. Maybe a few are fairly certain of that despite others being as firm in the opposite direction. However, I’ve noticed that some die-hard Bulls are admitting that the market may still weaken a bit more, even if it does not reach the -20% level (which as I said last week does not actually define a Bear market for me).
Stay up to date via the social media links below, because regardless of the outcome, big money is going to be made or lost in a short period of time. Rising volatility is seeing to that. The VIX did collapse fairly hard into the close on Friday, but remains above the prior high of 26.81. If it collapses below that on Tuesday, we could see a VIX reversal and a healing market into this week.
SP500 Index Chart (click to enlarge; SPX, SPY):
2. U.S. Small caps are crashing much faster (higher beta) than the SP500 Index. Stay away. Stick with safer large caps with growth prospects and financial stability. I warned you to stay out of them, although I did take an early bite on Thursday of mid-caps. That position could work out early this week however.
Russell 2000 U.S. Small Cap Index (RUT, IWM; click to enlarge):
3. Gold is barely above the prior breakout. If stocks recover from here, which is not a given, gold may go sideways to down. I believe it has been a “risk on” trade with the expectation of rising Fed dovishness and a weaker dollar. That said, I am not impressed with gold’s action of late and have no trading position in GLD, just a long term position for diversification out of currencies.
Gold ETF (GLD; click to enlarge):
4. U.S. 10 Year Treasury Note Yield (click chart to enlarge; TNX,TYX,TLT,TBF): I said rates would likely continue to fall. They did and are likely to hit the bottom of the range soon at 1.905%. I sold a bit of exposure at the end of the week as Treasuries (TLT) became a bit overbought.
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