Market Timing Brief™ for the 10-07-2016 Close (10-11-2016 SP500 Index Update): Stocks Drop Down Into Prior Range. Gold Pressured by Rising Rates But Rates Still Under Last High

A Market Timing Report based on the 10-07-2016 Close, published Sunday October 9th, 2016

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

UPDATE 10-11-2016: I posted on Twitter/StockTwits yesterday after the close that we’d “tapped the top of the range.” That was a place to lighten up if you were a trader, but as I explain below, the overall Bull market is not yet done in my opinion. This is ONE place you can add back some exposure, but save some powder in case there is another step down. Note that the small caps have broken down below the immediate support they were at on Friday (see 3rd chart below)… (label in 1st chart says “Vibrational Range”)

The following chart is for SPY, the SP500 Index ETF:

spy-sp500-etf-market-timing-chart-2016-10-11-226pm

Back to BOTTOM of range.

Continue reading about the set-up in the markets for this week…

1. SP500 Index: SP500 Large Cap Index (click chart to enlarge; SPX, SPY):

The monthly employment report out this past Friday was less than what was expected. I covered this on Twitter and StockTwits, so I won’t repeat it here (links below). It’s weak enough at least to reflect prospects of slow U.S. economic growth going forward, and at worse, hinting that we’ll see a recession within a year or so.

Keep up to date at Twitter and StockTwits where a combined 20,644 people are joining in. Thank you for your interest!

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sp500-index-spx-market-timing-chart-2016-10-07-close

Stocks Slip On Increased Fear of Rate Hike

Survey Says! Sentiment this week among individual investors (AAII.com) showed a Bull minus Bear percentage spread that was +0.89%, very neutral in the midst of the recent uncertainty. The percentage of “Neutrals” is now above 40% (above 40% Neutrals is Bullish on a market timing basis for higher prices out 6 months from today per AAII studies of their statistics).

10-05-16 12 am close to poll

Bulls 28.79%

Neutrals 43.30%

Bears 27.90%

2. U.S. Small Caps: Overvalued at present. We’ll stay away. I prefer midcaps and large, although they also are not cheap vs. their earnings, which have declined over the past year. Some say they are significantly overvalued.

Earnings season will punish all stocks that lack or have weak growth in revenues and earnings. Be careful to exit your weak holdings before earnings are reported. The “official earnings season” begins this Tuesday Oct. 11th with Aloca (AA).

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

iwm-russell-2000-etf-market-timing-chart-2016-10-07-close

Small caps testing base of recent range.

3. Gold: Gold is under pressure mainly because of rate fears, which will likely subside if earnings disappoint. It certainly has been a big set-back for gold Bulls. If earnings are in fact MUCH stronger than expected (as estimates are ALWAYS understated by companies, so they can generate surprises), expect more losses for gold as rate hikes into a slow world economy boost the US dollar and hurt gold in dollar terms. See last week’s issue for a link to my “golden rules.” Read my comment on rates below. The next move in U.S. interest RATES will determine gold’s next near-term move. That is because the next move in rates is going to move the US dollar. The dollar is testing resistance as shown HERE!

Gold ETF (click chart to enlarge the chart; GLD):

gld-etf-market-timing-chart-2016-10-07-close

Gold suffers a fall due to interest rate fears.

4. U.S. 10 Year Treasury Note Yield (TNX): Rates are still below the recent high (aqua line in chart below). If that is broken to the upside, you can expect GOLD to sell off harder. Stocks may not like it either, as raising rates ONLY works when the economy is strengthening.

U.S. 10 Year Treasury Note Yield (click chart to enlarge; TNX,TYX,TLT,TBF):

tnx-10-year-treasury-note-market-timing-chart-2016-10-07-close

Rates rising on fears of Federal Reserve stupidity. Raising rates into an economic slowdown would qualify as stupidity, as it would be internally inconsistent with their objectives.

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