A Market Timing Report based on the 1-06-2017 Close, published Sunday January 8, 2017.
I deliver focused comments on the markets. These are supplemented with “Tweets/StockTwits” (see links below).
My goal is to provide you with the most information in the shortest time period possible, which I will take to new levels this year. I will not bow down to the site ranking Gods. You follow what I do or you don’t. You hear my warnings and hear what I see as opportunities to invest and trade or you don’t. Either way I wish you well.
I’ve been doing this market timing thing (which also involves economic fundamentals), since the early 1980’s and avoided the 1987 crash and warned investors of the 2000 crash and guided my readers through the Great Recessionary Crash of 2008-2009 in the markets to the present day.
My advice is that if you gain from these insights to please let me know, below the post. You can also ask questions or make comments. I’m listening… If you do not engage, how will I know you are here? 😉
1. SP500 Index: The Federal Reserve has acted, employment was a bit weaker than expected, which gives the Fed some wiggle room, and the Trump Rally is now testing the top for the SP500 Index. The Fed still intends to hike rates at least 3 more times in 2017. That they’ve said. The economy will slow due to their hikes if the Trump growth plan does not work or does not work fast enough. That may be why rates have come back in a bit after failing a critical breakout (see chart #4 below).
The leader in this rally, the small caps, are down a bit and NOT back up testing the top. I’ve taken some profits this week, but my exposure is still quite high (all posted at social media links). I took some exposure out of China due to poor performance as the U.S. large caps rallied this week. The China trade is being hobbled by Trump, more than it should in my opinion, but I change my opinion quickly if the picture changes or does not progress. That’s what happened in the China trade this week.
You can see exactly what I did including selling my Facebook trading position at either of these two links:
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Keep up-to-date during the week at Twitter and StockTwits (links above), where a combined 23, 005 people are joining in…
The market will take another leg up if it believes Trump will make his promises a reality and that he can get past any obstruction by the Democrats, who are showing signs of wanting to retaliate for the lack of confirmation of their Supreme Court nominee, Garland, among other things! Morgan Stanley says “Sell the Inauguration,” but I don’t agree, exactly. Even if they are right, I believe the market will exceed the prior top by a substantial percentage. We will continue to buy the dips and sell a bit at the highs to buy lower.
SP500 Large Cap Index (click chart to enlarge; SPX, SPY):
Survey Says! Sentiment of individual investors (AAII.com) showed a Bull minus Bear percentage spread of +21.0% up just a bit from +19.8% last week.
More Bulls can be recruited from the Neutrals and Bears before sentiment becomes extreme, but some pullbacks DO occur from around a spread of 20%, which we have, so sentiment is not that helpful at the moment. There is room in either direction.
|Thurs. 12 am close to poll||Bulls 46.20%||Neutrals 28.57%||Bears 25.23%|
2. U.S. Small Caps: Small caps are not leading the retest of the prior high. The large caps are. That is actually a NEGATIVE for the very near term. This is a lousy place to add exposure to the market unless you have none IMO.
I would not add to positions without either:
- Another small cap breakout.
- A pullback worth buying percentage-wise.
Russell 2000 U.S. Small Cap Index (click chart to enlarge; RUT, IWM):
3. Gold: GLD has made some more progress, but was repelled from the last upside test. The upside target is the last breakdown area noted on the chart. The second possible rally failure point would be the 50 day moving average or thereabouts. The economic background is not great for gold. I’ve gone over this in prior posts.
What would be good for gold would be (while not so hot for “people” holding currency):
- The Federal Reserve raises rates so fast that it induces a U.S. recession.
- TrumpFlation kicks in as he spends gobs of money on his wall, infrastructure that does not add to productivity of the economy, tax cuts, wars, etc.
Gold ETF (click chart to enlarge the chart; GLD):
4. U.S. 10 Year Treasury Note Yield (TNX): The reversal in Treasuries should be watched for a RE-breakout to new highs above the recent high of 2.621%. That’s the key number to watch. If we go through there, we’ll be at 3% on the 10 Year faster than you can yell “Whoa Janet!” The financials would love that, but housing would not.
The Fed raising short rates will actually serve to LOWER long term rates if the economy slows as a result. That won’t happen if Trump’s multiple economic stimuli are launched quickly.
U.S. 10 Year Treasury Note Yield (click chart to enlarge; TNX,TYX,TLT,TBF):
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I find your market analysis to be a voice of calm in a sea of of turbulence and uncertainty. Who knows what Trump can get done and if the market does not like uncertainty, its betting on the Congress delivering stimulus for working people with Trump as the rubber stamp. For now, the market may have peaked and I’ve locked in the Gains from the rally following the election. A global crisis shock to the markets is my concern!
I appreciate your viewpoint Charles and your compliment. Global risks are certainly out there, but Europe seems to be backing down from negative rates to some degree, which is at least some hope. Japan is hell bent on intervening in the trajectory of the Japanese economy, so there’s a cushion there for now. Technically, European markets are looking better. China has not imploded though it faces challenges (see this week’s post from today for more on China…). The longer term picture is far murkier and is the higher risk in my view. If Trump spends “too much” driving up deficits through tax cuts and spending on infrastructure, interest rates could rise substantially and cause a U.S. recession worse than the last one. Our debt is at dangerous levels, something I hope Congressional Republicans can appreciate.
I really like your overview of what has happened each week in the different areas of the market and what your perspective is for each area.
Thank you Rob!