A Market Timing Report based on the 9-02-2016 Close, published Monday September 5th, 2016
I deliver focused comments on the markets. These are supplemented with “Tweets/StockTwits” (see links below).
1. SP500 Index: The highlight for the week was the sufficient employment number on Friday. U.S. jobs for the prior month came in at 151,000. The expected number was higher at 175,000, which means the market believes, or at least half believes, that the Federal Reserve may not move to raise the Fed Funds rate as early as September. The chance of a rate hike is considered to be below 50% until December, 2016 when it is 50.6% per the CME Group.
Remember that rising rates are OK only if the economy is strengthening, not weakening, so the low employment figures could be pointing to a further slowing of the economy in turn indicating that the Fed should lay off the hikes for now despite their recently expressed eagerness to hike. Weak jobs could also be a sign that we will see further slowing if we don’t get additional fiscal stimulus or other governmental manipulation, perhaps eventually leading to a market killing recession. Still, recession does not appear imminent, one reason being investor sentiment, which I update below the chart…
SP500 Large Cap Index (click chart to enlarge; SPX, SPY):
Survey Says! Sentiment this week among individual investors (AAII.com) showed a Bull minus Bear percentage spread of -2.92% after being near flat last week as well. Despite the bump up in the SP500 Index on Friday, sentiment remains weak, which is Bullish as is the percentage of “Neutrals,” which is nearly 40% (above 40% Neutrals is Bullish for higher prices out 6 months from today per AAII studies of their statistics).
|8-31-16 close to poll||Bulls 28.60%||Neutrals 39.87%||Bears 31.52%|
2. U.S. Small Caps: Small caps are testing a new breakout, but closed just 0.5 points above the prior high. This occurred despite negative GAAP earnings over a 12 month period, referred to as “nil” by the WSJ. Don’t believe it? Have a look: HERE (WSJ Site)
Russell 2000 U.S. Small Cap Index (click chart to enlarge; RUT, IWM):
3. Gold: Gold finally bounced on cue off the up trend line shown below after investors felt better about “low rates for longer.” We were buying more GLD near the low (see my social media links above). Negative real rates are the friend of gold. If you don’t understand what makes gold move up and down, have a look at my: Primer On When Gold Shines
Gold ETF (click chart to enlarge the chart; GLD):
4. U.S. 10 Year Treasury Note Yield (TNX): The break of the prior triangle was initially to the upside after Dr. Yellen’s speech at Jackson Hole. But now, that jump has been reversed. Follow the market, not the Fedspeak that may turn out simply to be a “jawboning” exercise in market manipulation. Markets speak louder than words.
U.S. 10 Year Treasury Note Yield (click chart to enlarge; TNX,TYX,TLT,TBF):
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