Market Timing Brief™ for the 9-28-2018 Close: Cracks Showing Up. SP500 Index Testing Below the Last Breakout. Small Caps Slipping. Gold Still Weak After Fed. Rates Falling Again?

A Market Timing Report based on the 09-28-2018 Close, published Saturday, September 29th, 2018…

I deliver focused comments on market timing once or twice a week.  These are supplemented with daily “Tweets/StockTwits” (see links below).

1.  SP500 Index Market Timing (S&P 500 Index®; SPY, SPX):

Cracks in the Bull thesis are showing up now.  No big trend changes yet, but cracks, which could lead to more.  The SP500 Index made a new high and then pulled back below the prior breakout.  Since around July 10th, the SP500 has been tracking the upper 2017 channel line noted in orange on the chart below.  It is still above that upper channel line, so there is no way I can consider the index to be significantly weak yet.

Still, we are also below the prior green up trend line, so the market has weakened just a bit from the prior rapid incline.  My concern is that the small caps are flirting with significantly more danger now, by slicing through their lower channel line noted in purple on the 2nd chart below.  Small caps need to confirm the large cap move as the market rises, or the underlying health of the rally is called into question. 

This early weakness in small caps, which in terms of capital gains have lost people money since the 6-20-2018 high over 3 months ago, may be an indicator that if growth is in fact going to slow, investors want to lower their exposure to higher beta small cap stocks now vs. later, ahead of the Q4 slowing and even more dramatic Q1 and Q2 2019 U.S. slowing of earnings and revenue growth outlined last week and in early August on this blog. 

Pay some attention to the blow ups happening outside the U.S.  Italy fell 3.72% on Friday.  This is a bad sign about EU growth slowing that has started in advance of U.S. growth slowing.  This is a global economy.  We don’t grow as fast when growth is slowing in the EU, Japan, and China!   Meanwhile the canary is at least warming up its voice in the U.S. as there has been a big increase in negative pre-announcements for Q3, as discussed last week. 

Now let’s check in on two “Canary Signals” we’ve been following:

“Intel-igent Market Timing Signal” (Intel; INTC):  Negative, but on Friday there was an upside reversal that still kept INTC below its 50 day moving average.  I said previously: “46.19 is now the reversal point to watch.”  (Reminder: INTC is our “tell” on 2nd half earnings in tech as noted HERE. Micron (MU) is another tech stock to watch as it just gave negative guidance this past week.)  INTC closed at 47.29 Friday ABOVE the prior low of 46.19.  Moving up further and closing above 47.42 would add a higher high to the picture and strengthen the trading position of INTC.

Bank of America (BAC) Market Timing Signal: Negative.  No, actually “miserable.”  Friday’s action brought the stock back to 29.46 in a big sell off on Friday that was the 6th down day of 6.  Rates were falling again after the Fed FOMC statement that they would raise rates, and so were financials (XLF and BAC).  We’d expect the opposite in an economy the market expected to remain strong.  Rates above the prior high shown on the TNX chart below would be required to spark a strong financial sector rally.  That doesn’t look probable right now.

Keep up-to-date during the week at Twitter and StockTwits (links below)…

Follow Me on Twitter®  Follow Me on StockTwits®.

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

sp500-index-spx-market-timing-chart-2018-09-28-close

Still making higher highs though below the prior breakout.

Survey Says!  Sentiment of individual investors (AAII.com) showed a Bull minus Bear percentage spread of +5.12% vs. 0.00% last week.  Sentiment is not very helpful in this range of spreads.  It says investors are only mildly Bullish just shy of an all time high.  If anything, that is somewhat Bullish for the 6 month outlook, which the survey assesses. 

AAII.Com Individual Investor Sentiment Poll
Bulls Neutrals Bears
36.22% 32.68% 31.10%
Thurs. 12 am CT close to poll

2.  U.S. Small Caps Market Timing (IWM): Small caps are weakening as discussed above.  A fall below the two converging yellow lines would not work out well.  The channel has already been broken to the downside.

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

iwm-russell-2000-market-timing-chart-2018-09-28-close

Small caps weakening.

3. Gold Market Timing (GLD):  Review the issues a few weeks back for an explanation for the abysmal performance of gold. As rates fall again, gold may perk up a bit, but the dollar could rally at the same time, blunting the gains from falling rates.  If financial panic ensues, both can rally together.  Last week I cited my prior article on gold: “When does gold shine and when does it decline?…Google that phrase and you’ll find it.  Read it serveral times, and you’ll know what makes gold move.

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

gld-gold-etf-market-timing-chart-2018-09-28-close

Gold still limping. Waiting for rates to fall more.

4. Interest Rate Market Timing – U.S. 10 Year Treasury Note Yield (TNX):

Rates are falling again having tapped the top of the recent trading range.  The trade is now back in the favor of the bond/Treasury Bulls.  The speculators looking for rising rates are going to be hurting in my view…

Check out the “Market Signal Summary” below – after you review the following chart…

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

tnx-10-year-treasury-note-market-timing-chart-2018-09-28-close

Not complicated. Rates topped out at the top of the range and are now falling again.

Now let’s review three key market timing signals together…. 

Do not use these signals as a trading plan.  They are rough guidelines.  I currently share my own moves on social media (links above).

MY MARKET SIGNAL AND TREND SUMMARY for a Further U.S. Stock Market Rally with Real GDP Growth (“real” means above inflation):

Stock Signal GREEN for a further U.S. stock market rally with a Bullish SP500 Index trend.

I will change my mind on the trend when the small caps move definitively below the lower yellow line in the small cap IWM chart above.  The small caps are a better indicator of the health of the economy, as they are most vulnerable to economic changes, and hence, are the basis for this signal.   The VIX (which relates to SPX volatility) closed at 12.12 on Friday vs. 12.07 the previous week.  This is still Bullish for the SP500 Index.

Same as last week: What must the VIX do this week?  As I said previously: “Any move back above VIX 13.31 again may indicate a developing Bearish trend.  A ‘test’ doesn’t count.   The last bigger spike was to 16.86, below the two previous spikes in volatility.”  The Bears must get through VIX 16.86 to spark a bigger correction.  The last little dip to the Sept. 7th low was only 1.73% which is more of a blip than a dip.  The Bulls need to take out the lowest VIX targets in the 11’s I shared on social media (links above) to keep the momentum going.

Gold Signal  GREEN for a further U.S. stock market rally with a BEARISH Gold Trend. 

Remember GLD is being used as an indicator for the ECONOMY here. 

Rate Signal NEUTRAL for a further stock market rally with a  NEUTRAL 10 Year Yield Trend. I said, “I would be surprised to see a sustained new recent TNX high above 3.115%.”  It got to 3.110% and turned down.  TNX must fall back below 3.035% to turn Bearish again. 

This level of the 10 Year Treasury Yield, which is too high for current conditions as explained HERE, could eventually slow the economy.  The market seems to have adjusted to rates of up to 3% or so as said in the signal summary HERE.”  A rapid push higher in rates would mean trouble for stocks, as occurred in early 2018.  

Note: I’ve updated my criteria for the equity signal for a further U.S. stock market rally to the following: GREEN = Bullish, YELLOW = Neutral, RED = Bearish.  In other words, the colors tell you whether the signal supports the stock rally or not, while the Bullish, Neutral, and Bearish designations are about the trend. 

NOTE: A BEARISH trend signal does not mean we should not buy.  A BULLISH trend signal does not mean you cannot sell some exposure.  It depends on what is going on in the economy and how oversold/overbought the market is at a given point whether the Bearish signal is to be sold, sold on the next bounce, etc. and whether a Bullish signal is to be bought or if profits should be taken.  A NEUTRAL trend signal does not mean the end of the Bull or Bear. It means to wait and look for possible subsequent entry points within the existing trend, Bull or Bear, but preserve capital if the entry fails.  Our strong intention is to buy low and sell high.  By the way, I will keep showing the prior orange “Trigger lines” in the charts for now as reference points only; they have historical value for us from the post-2016 election period.

Thank you for reading.  Would you please leave your comments below where it says “Leave a Reply”… or ask a question…  Pay it forward too by sending the link to MarketTiming.Blog (that link will immediately connect them to this webpage) to a relative or friend.  Thanks for doing that.

Be sure to visit the website for more general investing knowledge at:

Sun and Storm Investing™

Standard Disclaimer: It’s your money and your decision as to how to invest it.

I thank Worden Brothers for the charting system I use to post these charts.  If you want to know more about the charting system I use every day, go to my “Other Resources” page here:  Other Resources   It makes it much easier to follow along with me if you can see the charts and manipulate them on your own computer.  It’s a great investment to have an excellent charting system.  Check it out with a free trial at the link above.

Finally: Please excuse and report all typos if you are so moved.  I do my best to pick up most of them, but have not always found them all.  Shoot me a comment (I don’t have to post your typo report as I filter them before publication, but I’ll be grateful to you!)

Copyright © 2018 By Wall Street Sun and Storm Report, LLC All rights reserved.

Advertisements
Posted in Bonds, gold, investment, investor sentiment, large cap stocks, S&P 500 Index, small cap stocks, Treasuries | Tagged , , , , , , , , , , , , , , , | Leave a comment

Market Timing Brief™ for the 9-21-2018 Close: SP500 Index at New All Time High This Week. Small Caps Holding Above Breakout. Gold Flat-lining. Have Rates Finally Peaked?

A Market Timing Report based on the 09-21-2018 Close, published Saturday, September 22, 2018…

I deliver focused comments on market timing once or twice a week.  These are supplemented with daily “Tweets/StockTwits” (see links below).

1.  SP500 Index Market Timing (S&P 500 Index®; SPY, SPX):

The SP500 Index tested below the prior breakout above the 1-26-2018 all time high (marked by the second green line from the top in the chart below) reaching a low of 2864.12 on Sept. 7th, and then resumed its up trend.  These retracement tests of breakouts are not uncommon.  We are now at a brand new all time high, but it’s been just 2 days.  Most traders like to see three days of confirmation of a breakout.  We cannot judge the volume due to the fact it was a big options expiration day, when volume always spikes.

You can see on the chart below that the up trend has lost some strength in getting to this all time high.  It is BELOW the green upward slanting line, which was the prior up trend.  It must rise above there to further prove the strength of this rally.  This is all happening at a time when the China tariffs have been set by Pres. Trump at 10% for most products pending a further increase to 25% should China not comply with U.S. demands and reach a trade deal that addresses U.S. grievances.

The market seems to interpret Trump’s strategy net positively for now as it has reached all time highs despite it.  There are certain companies/industries that may be disproportionately impacted of course, but overall the market has given a tentative thumbs up to the current strategy.  This is likely at least part of what propelled the market to a new all time high this week as I said it would several weeks in a row.

Remember that whatever Trump gets from China, he’ll call a win, although I am impressed by the extent of his brinkmanship on trade so close to the midterm elections that could render him essentially a legislatively powerless President.  The Democrats are said to more likely flip the House than the Senate, but if they flip either, Trump will be dead in the water, at least for two years, until he attempts to flip things back in 2020 along with his re-election.  Results still pending!

What stands in the way of this market now is NOT Trump or the Trump Trade War, but the relative slowing of growth that is due to occur to a lesser degree in Q4, but to a greater degree in Q1 and Q2 of 2019 as I went over in detail this past August (see Aug. 3 and Aug 10 issues).

FactSet has an updated summary of the approximate HALVING of earnings growth in 2019 vs. 2018 per analysts HERETo get a taste of what’s brewing they noted “Highest Percentage of Negative EPS Preannouncements for S&P 500 Since Q1 2016.”  Of the 98 companies in the SP500 issuing guidance, 74 have guided negatively (74/98 = 75.51%) and 24 positively (24.49%) or roughly a 76%/24% split in favor of negative guidance.

To put it simply, a halving of E growth (earnings) for 2019 vs. 2018 means PEs are suddenly too high, because they are indirectly based on earnings growth rates unless a stock is a “mature company” throwing off lots of earnings at a steady though barely increasing rate.  This is why high dividend, low beta stocks tend to do better in periods of slowing growth.

If you  believe the Trump tax cuts are going to read through and drive GDP much higher than analysts believe, then keep your current exposure where it is and don’t budge when the market falls.  If you don’t, consider cutting some exposure or doing so in steps as the market falls and attempting to capture further gains via “Passive Shorting” a term I coined HERE.

It’s hard to be out early, yes, but it could be hard watching this year’s gains in tech, consumer discretionary, etc. dissolve.  There could be a lag in the market response, and maybe the market will move up a few more percent before a correction starts.  That is impossible to predict, so I won’t bother trying!  It’s a waste of time.

I’ve cut my exposure a bit as shared on social media and have changed sector exposure levels to raise them in REITs and healthcare and lower SP500 Index exposure.

A bit of a warning is in order though: Only a lower exposure level OR being short, which most investors won’t ever do it seems, are ways to avoid an absolute decline in assets unless your stocks are those that can levitate through draw-downs (not many of those)!

The Bull warning is that this is still a Bull market.  In fact, all three of my signals for a continuing Bull market are green now (Rate signal is pending verification though as noted below). 

The trend in stocks is still up, so I am content with my current positioning, capturing the vast majority of equity gains vs. max exposure, largely avoiding foreign markets, and increasing exposure to SPX sectors that do better in “growth slowing” periods.  I will watch for a volatility spike most likely before selling more stock exposure.

Now let’s check in on two “Canary Signals” we’ve been following:

“Intel-igent Market Timing Signal” (Intel; INTC):  Negative, but let’s watch for a continued reversal to the upside.  I said last week: “46.19 is now the reversal point to watch.”  (Reminder: INTC is our “tell” on 2nd half earnings in tech as noted HERE. Micron (MU) is another tech stock to watch as it just gave negative guidance this past week.)  INTC closed at 46.66 Friday ABOVE the prior low of 46.19, but if it continues to turn downward on Monday, this reversal will likely be lost and we’ll see another lower low.

Bank of America (BAC) Market Timing Signal: Negative.  Friday’s action brought the stock back below 31.36, which was the lower high it was trying to exceed.  It got to 31.37 and reversed.  No coincidence there.  Just as last week:  “Rates were rising this week but this financial ‘tell’ could not make it over the lower high just mentioned.”

Keep up-to-date during the week at Twitter and StockTwits (links below)…

Follow Me on Twitter®  Follow Me on StockTwits®.

SP500 Large Cap Index (click chart to enlarge; SPX, SPY): We did get the fresh all time high (ATH) this week, so the trend is still up with the caveats noted above!

sp500-index-spx-market-timing-chart-2018-09-21-close

New all time high. Is this just a marginal new high or will the trend continue?

Survey Says!  Sentiment of individual investors (AAII.com) showed a Bull minus Bear percentage spread of 0.00% vs. -0.75% last week.  The same comment applies this week as last: “Sentiment was flattened out to a flat spread.  There is plenty of room to both fall and rise.”  Since we are at another all time high for the SP500 Index this week, the sentiment spread by itself is more Bullish than Bearish.  Tops are not generally formed when investors are divided and likely confused!  Whether we get to a new high immediately or not, this says the Bull market is likely not yet done.

AAII.Com Individual Investor Sentiment Poll
Bulls Neutrals Bears
32.04% 35.92% 32.04%
Thurs. 12 am CT close to poll

2.  U.S. Small Caps Market Timing (IWM): Small caps are still in an up trend, which maintains my stock market signal as Bullish (see at end of report).  IWM closed just barely (0.20 points) above the prior breakout shown on the chart below (to the left in white numbers!).  This means a reversal to the downside could still occur.  The ETF is trading almost precisely on the lower channel line shown in purple.  A strong move up early in the week will reaffirm the up trend.  If not, there are plenty of potential downside targets.  I evaluate various levels in real time as we arrive at them, so stay tuned on social media via the links above. 

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

iwm-russell-2000-market-timing-chart-2018-09-21-close

Small caps are holding above our key breakout number still, but barely.

3. Gold Market Timing (GLD):  Review the issues of the prior weeks (3 weeks back at least) for an explanation for the abysmal performance of gold.  No life being shown.  This could change as economic growth slows.  Bonds will rally as rates fall.  If there is international panic, gold and the dollar can rise together.  Google “When does gold shine and when does it decline?” and you’ll find my article.

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

gld-gold-etf-market-timing-chart-2018-09-21-close

Gold remains in a slump due to the relatively strong dollar and higher rates.

4. Interest Rate Market Timing – U.S. 10 Year Treasury Note Yield (TNX):

If Ex-U.S. global growth has already slowed and is slowing further, and U.S. growth is also slated to slow slightly in Q4 and more dramatically in Q1 and Q2 of 2019, then rates should fall into 2019.  It’s not always possible to pick the exact top of a chart of course, and I am a bit early, but my assessment is that rates at this level given the what is happening in the rest of the world in terms of interest rates is unsustainable.

By the way, I picked IEF over TLT, because I thought there was some risk of being a bit early on this one.  TLT will provide a bigger bang as rates fall however.  This quarter’s SP500 Index earnings will still be strong, so this puts upward pressure on rates.  They assume the Fed will just keep raising rates for the next few years.  I do not assume that!

This is a trade that could be over within a few quarters...and of course, the thesis could be wrong.  My advice is to change your mind when you’re wrong.  There will always be another trade, but not for the stubborn.  They lose too much capital.  Only a new high above the top green line in the chart below would change this rate assessment.

Check out the “Market Signal Summary” below – after you review the following chart…

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

tnx-10-year-treasury-note-market-timing-chart-2018-09-21-close

Have rates finally peaked? CPI and PPI may have peaked as mentioned last week.

Now let’s review three key market timing signals together…. 

Do not use these signals as a trading plan.  They are rough guidelines.  I currently share my own moves on social media (links above).

MY MARKET SIGNAL AND TREND SUMMARY for a Further U.S. Stock Market Rally with Real GDP Growth (“real” means above inflation):

Stock Signal GREEN for a further U.S. stock market rally with a Bullish SP500 Index trend.

The small caps are a better indicator of the health of the economy, as they are most vulnerable to economic changes, and hence, are the basis for this signal.   The VIX (which relates to SPX volatility) closed at 11.68 on Friday vs. 12.07 the previous week.  This is Bullish for the SP500 Index.

What must the VIX do this week?  As I said previously: “Any move back above VIX 13.31 again may indicate a developing Bearish trend.  A ‘test’ doesn’t count.   The last bigger spike was to 16.86, below the two previous spikes in volatility.”  The Bears must get through VIX 16.86 to spark a bigger correction.  The last little dip to the Sept. 7th low was only 1.73% which is more of a blip than a dip.  The Bulls need to take out the lowest VIX targets I shared on social media (links above) this week to keep the momentum.

Gold Signal  GREEN for a further U.S. stock market rally with a BEARISH Gold Trend. 

Remember GLD is being used as an indicator for the ECONOMY here. 

Rate Signal GREEN (tentatively pending a new high above that green line in the TNX chart above) for a further stock market rally with a Bullish 10 Year Yield Trend. My opinion has not changed.  I would be surprised to see a sustained new recent TNX high above 3.115%.

Why did I change the signal?  I said previously “This signal will be tentatively Bullish given a new TNX high on a close of TNX above 3.035%.”  This level of the 10 Year Treasury Yield, which is too high for current conditions as explained HERE, could eventually slow the economy.  The market seems to have adjusted to rates of up to 3% or so as said in the signal summary HERE.”  A rapid push higher in rates would mean trouble for stocks, as occurred in early 2018.  

Note: I’ve updated my criteria for the equity signal for a further U.S. stock market rally to the following: GREEN = Bullish, YELLOW = Neutral, RED = Bearish.  In other words, the colors tell you whether the signal supports the stock rally or not, while the Bullish, Neutral, and Bearish designations are about the trend. 

NOTE: A BEARISH trend signal does not mean we should not buy.  A BULLISH trend signal does not mean you cannot sell some exposure.  It depends on what is going on in the economy and how oversold/overbought the market is at a given point whether the Bearish signal is to be sold, sold on the next bounce, etc. and whether a Bullish signal is to be bought or if profits should be taken.  A NEUTRAL trend signal does not mean the end of the Bull or Bear. It means to wait and look for possible subsequent entry points within the existing trend, Bull or Bear, but preserve capital if the entry fails.  Our strong intention is to buy low and sell high.  By the way, I will keep showing the prior orange “Trigger lines” in the charts for now as reference points only; they have historical value for us from the post-2016 election period.

Thank you for reading.  Would you please leave your comments below where it says “Leave a Reply”… or ask a question…  Pay it forward too by sending the link to MarketTiming.Blog (that link will immediately connect them to this webpage) to a relative or friend.  Thanks for doing that.

Be sure to visit the website for more general investing knowledge at:

Sun and Storm Investing™

Standard Disclaimer: It’s your money and your decision as to how to invest it.

I thank Worden Brothers for the charting system I use to post these charts.  If you want to know more about the charting system I use every day, go to my “Other Resources” page here:  Other Resources   It makes it much easier to follow along with me if you can see the charts and manipulate them on your own computer.  It’s a great investment to have an excellent charting system.  Check it out with a free trial at the link above.

Finally: Please excuse and report all typos if you are so moved.  I do my best to pick up most of them, but have not always found them all.  Shoot me a comment (I don’t have to post your typo report as I filter them before publication, but I’ll be grateful to you!)

Copyright © 2018 By Wall Street Sun and Storm Report, LLC All rights reserved.

Posted in Bonds, gold, investment, investor sentiment, large cap stocks, S&P 500 Index, small cap stocks, Treasuries | Tagged , , , , , , , , , , , , , , , | Leave a comment

Market Timing Brief™ for the 9-14-2018 Close: SP500 Looking for Another All Time High. Small and Mid Caps Keeping Up. Gold Flat. Rates Rising. Are You Losing Money on Cash?

A Market Timing Report based on the 09-14-2018 Close, published Saturday, September 15th, 2018…

I deliver focused comments on market timing once or twice a week.  These are supplemented with daily “Tweets/StockTwits” (see links below).

1.  SP500 Index Market Timing (S&P 500 Index®; SPY, SPX):

Complacency has its rewards.  Fewer words…  I have telegraphed much of what is expected to go down over the next 3 quarters of earnings reports in the U.S. both in posts on this blog and on social media.  I recommend reviewing the posts going back to August, as there is no need to repeat what has been said.  This prior report is especially important: HERE.  And I assess the probable degree of decline HERE.  These briefs are supposed to be about “focused comments.”

Let’s check in on two signals we’ve been following:

“Intel-igent Market Timing Signal”:  Strongly Negative.  46.19 is now the reversal point to watch.  Previously it was 48.50, so things are getting worse.  (Reminder: INTC is our “tell” on 2nd half earnings in tech as noted HERE.)  The stock closed at 45.54 Friday below the prior low of 46.19.  Intel is in its very own Bear Market, down 20.94% from the all time intraday high, and that’s after a small bounce on Weds. and Thurs.

Bank of America (BAC) Market Timing Signal: Negative.  Rates were rising this week but this financial “tell” was not!  Something is off here.  I’m betting rates will not keep rising, at least not for long. The stock is holding just above the 8-15-2018 low of 30.16, which must hold.  A breach of that would mean a revisit of the Feb. low.

This is from THREE weeks ago but is still in play, so I’ll keep it here: “The China trade war peace treaty remains a hope for the market.  It is an excuse for a further rally if anything, as the key is the growth rate of both earnings and revenues for U.S. companies, which are projected to slow, as said.”  (If you are not aware by now that U.S. growth may begin slowing in the current quarter (Q3) (Pepsi begins with its report on Oct. 2nd, and the big banks report on Oct. 11th) and that it will start to get far worse by Q1 and Q2 of 2019, you should click the links to the upper right and read the pertinent prior issues!

The Bull caveat?  Increased capital spending from the Trump/GOP Tax Bill could mitigate some of the shortfall seen by analysts mentioned in my August blog posts.  How much of a boost this could provide is unclear, but it will add somewhat to GDP in the 3rd and 4th quarters of 2018 and could carry through into 2019.  This could reduce a potential pullback of the market over the next three quarters.  The guesswork is good out to about a year, but is less reliable the farther out you go in time.

The Bear caveat?  U.S. multinationals depend on foreign sales for about half of their revenue, which means the current global growth slowing will be reading through to U.S. GDP vs. the positive effects of the tax bill.

The US Dollar strength that is the result of Ex-US growth slowing will begin impacting U.S. multinational results in the current quarter as the dollar was HIGHER than the prior year starting in July 2018 and this will continue through the following June if the dollar simply stops at this level.  If rates do fall in the U.S. as U.S. growth slows, the dollar will slip and shorten the window of impact.

Keep up-to-date during the week at Twitter and StockTwits (links below)…

Follow Me on Twitter®  Follow Me on StockTwits®.

SP500 Large Cap Index (click chart to enlarge; SPX, SPY): Is another all time high coming prior to U.S. GDP slowing particularly in Q4 2018 and Q1 and Q2 2019?  The prior SPX dip was to just 1 point below the key breakout above the Jan. high. This by itself is positive and affirms the up trend, but another new high is needed soon to confirm the Bullish stance of the market.

sp500-index-spx-market-timing-chart-2018-09-14-close

Retest of top or more?

Survey Says!  Sentiment of individual investors (AAII.com) showed a Bull minus Bear percentage spread of -0.75% vs. +15.92 last week.  Sentiment was flattened out to a flat spread.   There is plenty of room to both fall and rise. Since we are approaching the all time high again, this by itself is more Bullish than Bearish.  Tops are not generally formed when investors are divided and likely confused!  Whether we get to a new high immediately or not, this says the Bull market is likely not yet done.  Remember this is just one piece of a much larger picture, and trading on sentiment is iffy, particularly when it is not at extremes.

AAII.Com Individual Investor Sentiment Poll
Bulls Neutrals Bears
32.09% 35.07% 32.84%
Thurs. 12 am CT close to poll

2.  U.S. Small Caps Market Timing (IWM): Small caps are still in an up trend, which maintains my stock market signal as Bullish (see at end of report).  Since the 8-15-18 low, small caps and mid caps have kept up with large caps.  Prior to that, off the 6-27-18 low,  small and mid caps both trailed the SP500 Index, so the recent behavior of the smaller stocks is an improvement.  This is Bullish for the overall market.

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

iwm-russell-2000-market-timing-chart-2018-09-14-close

Small caps rising in channel for now.

3. Gold Market Timing (GLD):  Review the issues of the prior weeks (2 weeks back at least) for an explanation for the abysmal performance of gold.  Zero progress this week.

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

gld-gold-etf-market-timing-chart-2018-09-14-close

Gold has no game.

4. Interest Rate Market Timing – U.S. 10 Year Treasury Note Yield (TNX): Rates ticked up within the recent range as I warned they could.  PPI and CPI were both weaker Y/Y, so the rise should be limited.  If not, I change my mind. I added to intermediate term Treasuries on Friday.  To see what ETF I used, please click the social media links above.

This chart shows how the ANNUAL Rate of Inflation is coming off peak (potentially): HERE

Note the inflation rate (CPI) is 2.7% Y/Y, which means if you made less than that on your cash over the past year, you have lost buying power.  Remember CPI is considered to underestimate true inflation, but for now, let’s use it as a guide.

How many years do you have to go out to make 2.7% or more in Yield to Maturity terms?  These are real Treasury notes I found in the market:

1. To make the CPI over the past year of 2.7% – you’d need to buy a Treasury Note maturing in 1 year, 5 months, and 14 days dated 2-29-2020 maturity.

2. 2.8%: 2 years and 4 months, 1-15-2021 maturity

3. 2.9%: 4 years, 2 months, 15 days, 11-30-2022 maturity

4. 2.994%: 10 Years. That’s the yield of the 10 Year Treasury Note currently.

Yield Curve: You can see the quotes in round years from the Treasury: HERE

You can see there is not much more you are getting by going out past 1 1/2 years, but if rates fall, the longer term bonds will appreciate in value.  You then need to trade out of them after the global economic slowing passes, as rates will then rise again, and bond prices will fall.  This is a trade only that could pay off within a few quarters and then end…

Check out the “Market Signal Summary” below – after you review the following chart…

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

tnx-10-year-treasury-note-market-timing-chart-2018-09-14-close

Rates ticking up. How far? PPI and CPI data are coming in weak Y/Y.

Now let’s review three key market timing signals together…. 

Do not use these signals as a trading plan.  They are rough guidelines.  I currently share my own moves on social media (links above).

MY MARKET SIGNAL AND TREND SUMMARY for a Further U.S. Stock Market Rally with Real GDP Growth (“real” means above inflation):

Stock Signal GREEN for a further U.S. stock market rally with a Bullish SP500 Index trend.

The small caps are a better indicator of the health of the economy, as they are most vulnerable to economic changes, and hence, are the basis for this signal.   The VIX (which relates to SPX volatility) closed at 12.07 on Friday vs. a Bearish 14.88 the previous week and is now Bullish.

What must the VIX do this week?  As I said previously: “Any move back above VIX 13.31 again may indicate a developing Bearish trend.  A ‘test’ doesn’t count.   The last bigger spike was to 16.86, below the two previous spikes in volatility.”  The Bears must get through VIX 16.86 to spark a correction.  The last little dip to the Sept. 7th low was only 1.73% which is more of a blip than a dip. 

Gold Signal  GREEN for a further U.S. stock market rally with a BEARISH Gold Trend. 

Remember GLD is being used as an indicator for the ECONOMY here. 

Rate Signal NEUTRAL for a further stock market rally with a NEUTRAL 10 Year Yield Trend.  The signal goes to neutral this week, as it is challenging the top of an important range.  From 3 weeks ago: “It [TNX] is falling, because the world’s economy is not well.  Bond Bears could argue rates could remain range-bound for a while depending on U.S. inflation numbers coming in the next few months.  But then yields should head lower despite the Fed’s current hiking bias.  In fact, further Fed hikes will pressure the long end of the curve further.”  My opinion has not changed.  I would be surprised to see a new recent TNX high above 3.115%.

This signal will be tentatively Bullish given a new TNX high on a close of TNX above 3.035%.  As said before: “A more definitive rise above 3.035% would turn the rate trend back to Bullish for rates (Bearish for bonds) This level of the 10 Year Treasury Yield, which is too high for current conditions as explained HERE, could eventually slow the economy.  The market seems to have adjusted to rates of up to 3% or so as said in the signal summary HERE.”

Note: I’ve updated my criteria for the equity signal for a further U.S. stock market rally to the following: GREEN = Bullish, YELLOW = Neutral, RED = Bearish.  In other words, the colors tell you whether the signal supports the stock rally or not, while the Bullish, Neutral, and Bearish designations are about the trend. 

NOTE: A BEARISH trend signal does not mean we should not buy.  A BULLISH trend signal does not mean you cannot sell some exposure.  It depends on what is going on in the economy and how oversold/overbought the market is at a given point whether the Bearish signal is to be sold, sold on the next bounce, etc. and whether a Bullish signal is to be bought or if profits should be taken.  A NEUTRAL trend signal does not mean the end of the Bull or Bear. It means to wait and look for possible subsequent entry points within the existing trend, Bull or Bear, but preserve capital if the entry fails.  Our strong intention is to buy low and sell high.  By the way, I will keep showing the prior orange “Trigger lines” in the charts for now as reference points only; they have historical value for us from the post-2016 election period.

Thank you for reading.  Would you please leave your comments below where it says “Leave a Reply”… or ask a question…  Pay it forward too by sending the link to MarketTiming.Blog (that link will immediately connect them to this webpage) to a relative or friend.  Thanks for doing that.

Be sure to visit the website for more general investing knowledge at:

Sun and Storm Investing™

Standard Disclaimer: It’s your money and your decision as to how to invest it.

I thank Worden Brothers for the charting system I use to post these charts.  If you want to know more about the charting system I use every day, go to my “Other Resources” page here:  Other Resources   It makes it much easier to follow along with me if you can see the charts and manipulate them on your own computer.  It’s a great investment to have an excellent charting system.  Check it out with a free trial at the link above.

Finally: Please excuse and report all typos if you are so moved.  I do my best to pick up most of them, but have not always found them all.  Shoot me a comment (I don’t have to post your typo report as I filter them before publication, but I’ll be grateful to you!)

Copyright © 2018 By Wall Street Sun and Storm Report, LLC All rights reserved.

Posted in Bonds, gold, investment, investor sentiment, large cap stocks, S&P 500 Index, small cap stocks, Treasuries | Tagged , , , , , , , , , , , , , , , | Leave a comment

Market Timing Brief™ for the 9-07-2018 Close: SP500 Index Sags Below the January High. Gold on Life Support. Rates Rising on Employment/Wage Data.

A Market Timing Report based on the 09-07-2018 Close, published Sunday, September 9th, 2018…

I deliver focused comments on market timing once or twice a week.  These are supplemented with daily “Tweets/StockTwits” (see links below).

1.  SP500 Index Market Timing (S&P 500 Index®; SPY, SPX):

After reaching a new high, the SP500 Index this past week gave up that high by just a bit despite a strong employment number on Friday.  Wages were also up.  One can argue that the Fed MUST move rates up steadily now, but this does not account for the slowing of growth I’ve been discussing that is starting in Q4 2018 and in the first half of 2019 according to analysts as a group.

The SPX close was 2871.68 vs. the prior high on 1-26-18 of 2872.87, so this represents a test just below the prior high, which may succeed or fail to lead to yet lower prices.  The SP500 index is still stretched above the 2017 up channel (orange lines in the chart below), so it can pull back and still maintain the up trend as long as the dip doesn’t take it too low.  The last pullback into the end of June took the SP500 Index just below the 50 day moving average.  As many of you know, I don’t use moving averages as trading signals.  I observe the market when it reaches a moving average to determine its likely behavior in a pivot off such levels.

Let’s check in on two signals we’ve been following:

“Intel-igent Market Timing Signal”:  Strongly Negative.  Last weeks I said: The stock looks like it is forming a temporary base.  48.50 is a reversal point to watch.”  (Reminder: INTC is our “tell” on 2nd half earnings in tech as noted HERE.  The stock closed at 46.45 Friday and is testing barely above the prior low of 46.43.  Share buybacks could keep it levitated for a while, but remember that they can let it fall and reclaim shares at better prices.  Depending on buybacks at support levels like this is not a reliable strategy.

Bank of America (BAC) Market Timing Signal: Negative.  It should have rallied with rates this week, and it did not.  A series of lower highs with a failed breakout have been established.

This is from two weeks ago but still in play, so I’ll keep it here: “The China trade war peace treaty remains a hope for the market.  It is an excuse for a further rally if anything, as the key is the growth rate of both earnings and revenues for U.S. companies, which are projected to slow, as said.”  (If you are not aware by now that U.S. growth may begin slowing in the to-be-reported quarter (Q3) and that it will start to get far worse by Q1 and Q2 of 2019, you should click the links to the upper right and read the past 4 issues or so!

Keep up-to-date during the week at Twitter and StockTwits (links below)…

Follow Me on Twitter®  Follow Me on StockTwits®.

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

sp500-index-spx-market-timing-chart-2018-09-07-close

Testing below the Jan. ATH.

Survey Says!  Sentiment of individual investors (AAII.com) showed a Bull minus Bear percentage spread of +15.92 vs. +19.11 last week.  Sentiment is mildly Bullish at these levels.  This week, it is not particularly helpful as a guide.  There is room to both fall and rise.

AAII.Com Individual Investor Sentiment Poll
Bulls Neutrals Bears
42.22% 31.48% 26.30%
Thurs. 12 am CT close to poll

2.  U.S. Small Caps Market Timing (IWM): Still in an up trend, which maintains my stock market signal as Bullish (see at end of report).  This week has brought a decline within the Bullish trend channel.  The purple line is the base of that channel, and it’s now running along side the 50 day moving average.  The line must hold to avoid significantly more damage to the Russell 2000 small caps.

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

iwm-russell-2000-market-timing-chart-2018-09-07-close

Falling in the channel so far…

3. Gold Market Timing (GLD):  Review prior weeks (2 weeks back at least) for explanation for the abysmal performance of gold.  With the economy still strong and Fed rates rising ahead of inflation, which may have peaked out at this point, gold has little reason to rally.  Further currency crises around the world and U.S. growth slowing could lead to better gold returns at the end of the year and in early 2019.

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

gld-gold-etf-market-timing-chart-2018-09-07-close

Could get even weaker if economy keeps booming. Only end of 2018 into 2019 slowing or world crisis can lift gold.

4. Interest Rate Market Timing – U.S. 10 Year Treasury Note Yield (TNX): Rates ticked up within the recent range as I warned they could, based on the strong employment report on Friday along with strong wage growth, but this does not mean we’re headed to new inflation highs, unless President Trump drives us into a global trade war.  As we know, he negotiates using strong arm tactics, but in the end, he cannot want to seriously hurt consumers who depend on cheap foreign imports.  This could lead to a period of stagflation if he does.  I doubt he’d be happy with his GDP numbers under those circumstances.

The Supreme Lifetime leader of China, Xi, has much more negotiating room than Trump has!  Check below in my signal summary to see the rate level when things begin to look Bullish again for rates rising.  When the market changes, we change our minds.  Being stubborn is a dumb practice in general, and it costs us big bucks in investing when we don’t adjust to the changes we see. 

Pay close attention to the PPI and CPI inflation numbers out this week on Weds. and Thurs., respectively!

Check out the market signal summary below, after you review the chart…

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

tnx-10-year-treasury-note-market-timing-chart-2018-09-07-close

Rates rising in the range on wage inflation.

Now let’s review three key market timing signals together…. 

Do not use these signals as a trading plan.  They are rough guidelines.  I currently share my own moves on social media (links above).

MY SIGNAL AND TREND SUMMARY for a Further U.S. Stock Market Rally with Real GDP Growth (“real” means above inflation):

Stock Signal GREEN for a further U.S. stock market rally with a Bullish SP500 Index trend.  I won’t relabel the SPX trend based on a micro drop below the Jan. 2018 high. 

The small caps are a better indicator of the health of the economy, as they are most vulnerable to economic changes, and hence, are the basis for this signal.   The VIX (which relates to SPX volatility) closed at 14.88 on Friday vs. 12.86 the previous week and is Bearish.   From past week: “I would not be shocked to see some early Sept. upside action in the VIX.”  There you go… 

I also said: “Any move back above VIX 13.31 again may indicate a developing Bearish trend.  A ‘test’ doesn’t count.   The last bigger spike was to 16.86, below the two previous spikes in volatility.”  The Bears must get through VIX 16.86 to turn this dip into a correction.

Gold Signal  GREEN for a further U.S. stock market rally with a BEARISH Gold Trend. 

Remember GLD is being used as an indicator for the ECONOMY here. 

Rate Signal RED for a further stock market rally with a BEARISH 10 Year Yield Trend.  From last week: “It is falling, because the world’s economy is not well.  Bond Bears could argue rates could remain range-bound for a while depending on U.S. inflation numbers coming in the next few months.  But then yields should head lower despite the Fed’s current hiking bias.  In fact, further Fed hikes will pressure the long end of the curve further.”

This Bearish signal will be voided on a close of TNX above 3.035%.  As said before: “A more definitive rise above 3.035% would turn the rate trend back to Bullish for rates (bearish for bonds) This level of the 10 Year Treasury Yield, which is too high for current conditions as explained HERE, could eventually slow the economy.  The market seems to have adjusted to rates of up to 3% or so as said in the signal summary HERE.”

Note: I’ve updated my criteria for the equity signal for a further U.S. stock market rally to the following: GREEN = Bullish, YELLOW = Neutral, RED = Bearish.  In other words, the colors tell you whether the signal supports the stock rally or not, while the Bullish, Neutral, and Bearish designations are about the trend. 

NOTE: A BEARISH trend signal does not mean we should not buy.  A BULLISH trend signal does not mean you cannot sell some exposure.  It depends on what is going on in the economy and how oversold/overbought the market is at a given point whether the Bearish signal is to be sold, sold on the next bounce, etc. and whether a Bullish signal is to be bought or if profits should be taken.  A NEUTRAL trend signal does not mean the end of the Bull or Bear. It means to wait and look for possible subsequent entry points within the existing trend, Bull or Bear, but preserve capital if the entry fails.  Our strong intention is to buy low and sell high.  By the way, I will keep showing the prior orange “Trigger lines” in the charts for now as reference points only; they have historical value for us from the post-2016 election period.

Thank you for reading.  Would you please leave your comments below where it says “Leave a Reply”… or ask a question…  Pay it forward too by sending the link to MarketTiming.Blog (that link will immediately connect them to this webpage) to a relative or friend.  Thanks for doing that.

Be sure to visit the website for more general investing knowledge at:

Sun and Storm Investing™

Standard Disclaimer: It’s your money and your decision as to how to invest it.

I thank Worden Brothers for the charting system I use to post these charts.  If you want to know more about the charting system I use every day, go to my “Other Resources” page here:  Other Resources   It makes it much easier to follow along with me if you can see the charts and manipulate them on your own computer.  It’s a great investment to have an excellent charting system.  Check it out with a free trial at the link above.

Finally: Please excuse and report all typos if you are so moved.  I do my best to pick up most of them, but have not always found them all.  Shoot me a comment (I don’t have to post your typo report as I filter them before publication, but I’ll be grateful to you!)

Copyright © 2018 By Wall Street Sun and Storm Report, LLC All rights reserved.

Posted in Bonds, gold, investment, investor sentiment, large cap stocks, S&P 500 Index, small cap stocks, Treasuries | Tagged , , , , , , , , , , , , , , , | Leave a comment

Market Timing Brief™ for the 8-31-2018 Close: SP500 Upside of 7.36% or a Typical Bumpy September? Weak Gold Bounce. Rates Falling Again.

A Market Timing Report based on the 08-31-2018 Close, published Saturday, September 2nd, 2018…

I deliver focused comments on market timing once or twice a week.  These are supplemented with daily “Tweets/StockTwits” (see links below).

1.  SP500 Index Market Timing (S&P 500 Index®; SPY, SPX):

We got the new high we were looking for.  The trend is still UP.

Let’s check in on two signals we’ve been following:

“Intel-igent Market Timing Signal”:  Strongly Negative.  Last weeks I said: The stock looks like it is forming a temporary base.  48.50 is a reversal point to watch.”  (Reminder: INTC is our “tell” on 2nd half earnings in tech as noted HERE.  INTC rose toward, but did not rise above the 50 day moving average.  It rose to 48.86 and closed Friday 8-31 at 48.43, barely below the above Bull target.  We don’t trade off moving averages, because they don’t reflect accurately when a stock or a market is stretched one way or another, but they are guides.  The trend is still DOWN for INTC despite the blip up.

Bank of America (BAC) Market Timing Signal: Last week I said: “Negative as it’s off a lower double high and a failed breakout.  The stock is still lingering around that lower high level.”  This week, BAC made an even lower high, which is even more negative.  The stock must rise above 31.36 to change the trend, and it must not fail another breakout as it has done TWICE now since the May high. 

Still true: “The China trade war peace treaty remains a hope for the market.  It is an excuse for a further rally if anything, as the key is the growth rate of both earnings and revenues for U.S. companies, which are projected to slow, as said.”  (If you are not aware by now that U.S. growth may begin slowing in the to-be-reported quarter (Q3) and that it will start to get far worse by Q1 and Q2 of 2019, you should click the links to the upper right and read the past 4 issues or so!

Sentiment is the one new thing worth looking at this week.  First review the chart below and then we’ll discuss sentiment. 

Keep up-to-date during the week at Twitter and StockTwits (links below)…

Follow Me on Twitter®  Follow Me on StockTwits®.

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

sp500-index-spx-market-timing-chart-2018-08-31-close

Trend is up until it isn’t.

Survey Says!  Sentiment of individual investors (AAII.com) showed a Bull minus Bear percentage spread of +19.11 vs. +11.39% last week.  The Bulls did increase this week substantially to nearly 20% through conversion of Bears and some Neutrals.

There are two 2018 data points following the 1-26-18 high with this level of Bullishness and one is irrelevant as it was just after the 2-9-18 low.  The current context is very different in volatility terms to that time, so the most recent data points that matters are the spreads of 16.9% to 24.9% achieved on 12-13-17 and 12-20-17, respectively.  Let’s back up 3 trading days from 12-20 back to 12-15-17 (between the reporting dates of sentiment for those two weeks) and look at how much the market rallied from there to the 1-26-18 top: 7.36%. 

At the January high on 1-26-18, the sentiment spread had already dropped in a down, up, down fashion over a 3 week period to just 21.4% from 44.2% back on 1-03-18 (the peak).

The other data point that is similar is the sentiment spread of 23.1% reached on 6-13-18.  The SP500 Index dropped 3.57% from the 6-13 intraday high to the 6-28-18 intraday low.

CONCLUSION: Sentiment is mid-range in Bullishness.  Sentiment could fizzle at any point from here, particularly if the election polls turn sour against Trump and his chances of holding both houses of Congress, and if it does decline, we could see a dip of 3 to 4% as we did in the second half of June when sentiment fell from a 23.1% peak on June 13th.  

However, there is room to rise to the level of 1-03-18 sentiment of 44.2% or even higher as happened way back in 2000, when investors were even more “Crazy Rich” over-exuberant. If the market return merely matches the return we saw from the last melt-up run into the end of January, we could see a return of +7.36% or more.  Then we could see another quick drop down.

Then again, you may want to click on my social media posts and review what I reported for the Sept. dip events over the past 5 years (posted 8-29-17).  Not a great pattern for the Bulls except for 2017, when the early Sept. dip was very minimal and was preceded by a another small dip of only about 2% (eyeballing it).

AAII.Com Individual Investor Sentiment Poll
Bulls Neutrals Bears
43.50% 32.11% 24.39%
Thurs. 12 am CT close to poll

2.  U.S. Small Caps Market Timing (IWM): Still in up trend, so the stock signal below is still Bullish.  It’s about in the middle of the up trend (purple lines).

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

iwm-russell-2000-market-timing-chart-2018-08-31-close

Small cap up trend continues as well.

3. Gold Market Timing (GLD):  Review prior weeks for explanation for the abysmal performance of gold. See those volume spikes on pullbacks? 

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

gld-gold-etf-market-timing-chart-2018-08-31-close

Gold still not showing signs of life.

4. Interest Rate Market Timing – U.S. 10 Year Treasury Note Yield (TNX): Yields did tick up and fell back right at the 50 day moving average (aqua line).  Still in down trend.  2.795% yield is the next check point for the Bond Bulls.

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

tnx-10-year-treasury-note-market-timing-chart-2018-08-31-close

Rates falling…

Now let’s review three key market timing signals together…. 

Do not use these signals as a trading plan.  They are rough guidelines.  I currently share my own moves on social media (links above).

MY SIGNAL AND TREND SUMMARY for a Further U.S. Stock Market Rally with Real GDP Growth (“real” means above inflation):

Stock Signal GREEN for a further U.S. stock market rally with a Bullish SP500 Index trend. The small caps are a better indicator of the health of the economy, as they are most vulnerable to economic changes, and hence, are the basis for this signal.   The VIX (which relates to SPX volatility) closed at 12.86 on Friday vs. 11.99 the previous week and is Bullish.   The VIX spiked to 14.03 on Friday.  I would not be shocked to see some early Sept. upside action in the VIX.  That said, there is room for the VIX to fall to the sub-10 level should another melt-up pile on occur.  Consult my social media posts at the links above for more on VIX targets for the Bulls. 

Any move back above VIX 13.31 again may indicate a developing Bearish trend.  A “test” doesn’t count.   The last bigger spike was to 16.86, below the two previous spikes in volatility.

Gold Signal  GREEN for a further U.S. stock market rally with a BEARISH Gold Trend. 

Remember GLD is being used as an indicator for the ECONOMY here. 

Rate Signal RED for a further stock market rally with a BEARISH 10 Year Yield Trend.  It is falling, because the world’s economy is not well.  Bond Bears could argue rates could remain range-bound for a while depending on U.S. inflation numbers coming in the next few months.  But then yields should head lower despite the Fed’s current hiking bias.  In fact, further Fed hikes will pressure the long end of the curve further.

This Bearish signal will be voided on a close of TNX above 3.035%.  As said before: “A more definitive rise above 3.035% would turn the rate trend back to Bullish for rates (bearish for bonds) This level of the 10 Year Treasury Yield, which is too high for current conditions as explained HERE, could eventually slow the economy.  The market seems to have adjusted to rates of up to 3% or so as said in the signal summary HERE.”

Note: I’ve updated my criteria for the equity signal for a further U.S. stock market rally to the following: GREEN = Bullish, YELLOW = Neutral, RED = Bearish.  In other words, the colors tell you whether the signal supports the stock rally or not, while the Bullish, Neutral, and Bearish designations are about the trend. 

NOTE: A BEARISH trend signal does not mean we should not buy.  A BULLISH trend signal does not mean you cannot sell some exposure.  It depends on what is going on in the economy and how oversold/overbought the market is at a given point whether the Bearish signal is to be sold, sold on the next bounce, etc. and whether a Bullish signal is to be bought or if profits should be taken.  A NEUTRAL trend signal does not mean the end of the Bull or Bear. It means to wait and look for possible subsequent entry points within the existing trend, Bull or Bear, but preserve capital if the entry fails.  Our strong intention is to buy low and sell high.  By the way, I will keep showing the prior orange “Trigger lines” in the charts for now as reference points only; they have historical value for us from the post-2016 election period.

Thank you for reading.  Would you please leave your comments below where it says “Leave a Reply”… or ask a question…  Pay it forward too by sending the link to MarketTiming.Blog (that link will immediately connect them to this webpage) to a relative or friend.  Thanks for doing that.

Be sure to visit the website for more general investing knowledge at:

Sun and Storm Investing™

Standard Disclaimer: It’s your money and your decision as to how to invest it.

I thank Worden Brothers for the charting system I use to post these charts.  If you want to know more about the charting system I use every day, go to my “Other Resources” page here:  Other Resources   It makes it much easier to follow along with me if you can see the charts and manipulate them on your own computer.  It’s a great investment to have an excellent charting system.  Check it out with a free trial at the link above.

Finally: Please excuse and report all typos if you are so moved.  I do my best to pick up most of them, but have not always found them all.  Shoot me a comment (I don’t have to post your typo report as I filter them before publication, but I’ll be grateful to you!)

Copyright © 2018 By Wall Street Sun and Storm Report, LLC All rights reserved.

Posted in Bonds, gold, investment, investor sentiment, large cap stocks, S&P 500 Index, small cap stocks, Treasuries | Tagged , , , , , , , , , , , , , , | Leave a comment

Market Timing Brief™ for the 8-24-2018 Close: Stock Signal Is Green but Market Needs to Move Still Higher. Gold Bounces in Down Trend. Rates Hit Bottom of Recent Range.

A Market Timing Report based on the 08-24-2018 Close, published Saturday, August 25th, 2018…

I deliver focused comments on market timing once or twice a week.  These are supplemented with daily “Tweets/StockTwits” (see links below).

1.  SP500 Index Market Timing (S&P 500 Index®; SPY, SPX):

I said last week: “The SP500 Index must reach a new all time high at this point.  This could happen based on continued enthusiasm for Q3 earnings and revenues.”  The market for now is content with the recent strong earnings and revenues and does not see the slowing coming or assumes it will be overcome by Trump tax plan induced growth that is acting on a delay.

Even non-voting member of the Fed, Bullard said U.S. economic growth would slow in 2019, so this is not exactly a secret.  Are market participants sitting quietly, fully loaded with stocks just waiting for the prices of their stocks to drop as U.S. GDP growth drops into Q4 2018 and more dramatically in Q1 and Q2 of 2019 as I’ve laid out from published data HERE?  You’ll have to decide why the market is moving up rather than down in response to the known slowing of growth coming.

Let’s check in on two signals we’ve been following:

“Intel-igent Market Timing Signal”:  Strongly Negative.  The stock looks like it is forming a temporary base.  48.50 is a reversal point to watch.  (Reminder: INTC is our “tell” on 2nd half earnings in tech as noted HERE.  The Semiconductor Index (SMH) is back on track as far as the trend line is concerned.  It is rising up off the prior up trend line, which is positive.  A turn here?  We’ll see.

Bank of America (BAC) Market Timing Signal: Negative as it’s off a lower double high and a failed breakout.  The stock is still lingering around that lower high level.  As said last week: “There is a chance inflation could accelerate a bit longer, which could hold US rates up and hence hold the banks up, but it won’t last long, as global growth decelerates.”  As rates are at the bottom of the recent range, they could rally a bit if inflation data stays warm or goes a bit higher, before falling again. 

The China trade war peace treaty remains a hope for the market.  It is an excuse for a further rally if anything, as the key is the growth rate of both earnings and revenues for U.S. companies, which are projected to slow, as said.  The other fuel for the Bulls is the relatively low level of Bullishness still as I’ll show you after you review the chart just below…

You can see the SP500 Index made a marginal new high (less than 2 points), so it must continue up and not reverse course.  Sometimes markets will make a slightly higher high for a couple of days and then sell off.  If the rally steps up another notch, it’s likely for real.  Many have referred to this process as the “Melt-up.”  Markets can go crazy to the upside during melt-ups, but it makes them more vulnerable to disappointment.  That does not mean I’m “selling everything.”  Not at all.  My exposure levels are shared at the social media levels below.  I’ve raised some cash, but still have a high level of exposure to the U.S. market (and substantial overexposure vs. foreign markets).

Keep up-to-date during the week at Twitter and StockTwits (links below)…

Follow Me on Twitter®  Follow Me on StockTwits®.

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

sp500-index-spx-market-timing-chart-2018-08-24-close

SPX hits a new all time high.

Survey Says!  Sentiment of individual investors (AAII.com) showed a Bull minus Bear percentage spread of +11.39% vs. +7.09% last week.  Bulls are still not at an extreme.   In the context of being at all time highs, it’s still Bullish.  Investors should be elated at all time highs.

AAII.Com Individual Investor Sentiment Poll
Bulls Neutrals Bears
38.46% 34.47% 27.07%
Thurs. 12 am CT close to poll

2.  U.S. Small Caps Market Timing (IWM): Last week I said: Small caps are now at the top of the triangle….“Follow the bouncing ball either way out of the triangle.”  If you followed that advice, you may have added to IWM on that breakout above the top of the triangle.  I did not, as I feel I have enough exposure to higher beta stocks via IJH (mid caps), which are also at new highs.  The small caps are only about mid-channel now, despite being at an all time high, so there is plenty of room for them to rally higher.

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

iwm-russell-2000-market-timing-chart-2018-08-24-close

Another breakout above that triangle and in mid channel so has room to rally even more.

3. Gold Market Timing (GLD):  Same explanation as two weeks ago covered in Section #3 HERE.  Gold is still an iffy bet to make considering the prospects for the U.S. dollar outperforming.

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

gld-gold-etf-market-timing-chart-2018-08-24-close

The dollar is beating gold as are U.S. stocks!

4. Interest Rate Market Timing – U.S. 10 Year Treasury Note Yield (TNX): The dumb speculators are going to pay for the error of their thinking, but perhaps not next week.  The 10 Year Yield reached the bottom of the recent trading range, so the possibility for a bounce must be considered.  If they break even lower, that will be a negative sign for the U.S. economy. 

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

tnx-10-year-treasury-note-market-timing-chart-2018-08-24-close

Rates reach the bottom of the range.

Now let’s review three key market timing signals together…. 

Do not use these signals as a trading plan.  They are rough guidelines.  I currently share my own moves on social media (links above).

MY SIGNAL AND TREND SUMMARY for a Further U.S. Stock Market Rally with Real GDP Growth (“real” means above inflation):

Stock Signal GREEN for a further U.S. stock market rally with a Bullish SP500 Index trend. The small caps are a better indicator of the health of the economy, as they are most vulnerable to economic changes, and they just hit an ALL TIME HIGH.   The VIX (which relates to SPX volatility) closed at 11.99 on Friday vs. 12.64 the previous week and is Bullish.   There is room for the VIX to fall to the sub-10 level.  Consult my social media posts at the links above for more on VIX targets for the Bulls. 

Any move back above VIX 13.31 again may indicate a developing Bearish trend.  A “test” doesn’t count.   The last spike was to 16.86, below the two previous spikes in volatility.

Gold Signal  GREEN for a further U.S. stock market rally with a BEARISH Gold Trend. 

Remember GLD is being used as an indicator for the ECONOMY here. 

Rate Signal RED for a further stock market rally with a BEARISH 10 Year Yield Trend.  Hit the bottom of the range this week.  Rates could remain range-bound for a while depending on inflation numbers coming in the next few months. Then they should head lower.

This Bearish signal will be voided on a close of TNX above 3.035%.  As said before: “A more definitive rise above 3.035% would turn the rate trend back to Bullish for rates (bearish for bonds) This level of the 10 Year Treasury Yield, which is too high for current conditions as explained HERE, could eventually slow the economy.  The market seems to have adjusted to rates of up to 3% or so as said in the signal summary HERE.”

Note: I’ve updated my criteria for the equity signal for a further U.S. stock market rally to the following: GREEN = Bullish, YELLOW = Neutral, RED = Bearish.  In other words, the colors tell you whether the signal supports the stock rally or not, while the Bullish, Neutral, and Bearish designations are about the trend. 

NOTE: A BEARISH trend signal does not mean we should not buy.  A BULLISH trend signal does not mean you cannot sell some exposure.  It depends on what is going on in the economy and how oversold/overbought the market is at a given point whether the Bearish signal is to be sold, sold on the next bounce, etc. and whether a Bullish signal is to be bought or if profits should be taken.  A NEUTRAL trend signal does not mean the end of the Bull or Bear. It means to wait and look for possible subsequent entry points within the existing trend, Bull or Bear, but preserve capital if the entry fails.  Our strong intention is to buy low and sell high.  By the way, I will keep showing the prior orange “Trigger lines” in the charts for now as reference points only; they have historical value for us from the post-2016 election period.

Thank you for reading.  Would you please leave your comments below where it says “Leave a Reply”… or ask a question…  Pay it forward too by sending the link to MarketTiming.Blog (that link will immediately connect them to this webpage) to a relative or friend.  Thanks for doing that.

Be sure to visit the website for more general investing knowledge at:

Sun and Storm Investing™

Standard Disclaimer: It’s your money and your decision as to how to invest it.

I thank Worden Brothers for the charting system I use to post these charts.  If you want to know more about the charting system I use every day, go to my “Other Resources” page here:  Other Resources   It makes it much easier to follow along with me if you can see the charts and manipulate them on your own computer.  It’s a great investment to have an excellent charting system.  Check it out with a free trial at the link above.

Finally: Please excuse and report all typos if you are so moved.  I do my best to pick up most of them, but have not always found them all.  Shoot me a comment (I don’t have to post your typo report as I filter them before publication, but I’ll be grateful to you!)

Copyright © 2018 By Wall Street Sun and Storm Report, LLC All rights reserved.

Posted in Bonds, gold, investment, investor sentiment, large cap stocks, S&P 500 Index, small cap stocks, Treasuries | Tagged , , , , , , , , , , , , , , | 2 Comments

Market Timing Brief™ for the 8-17-2018 Close: Will the 2018 Elections Spook the U.S. Markets? Small Caps On Verge of a Signal. Gold Weak vs. Strong U.S. Dollar. Rates Should Move Even Lower.

A Market Timing Report based on the 08-17-2018 Close, published Saturday, August 18th, 2018…

I deliver focused comments on market timing once or twice a week.  These are supplemented with daily “Tweets/StockTwits” (see links below).

1.  SP500 Index Market Timing (S&P 500 Index®; SPY, SPX):

No need to rehash the current set-up as it’s the same as last week as explained HERE.  The SP500 Index must reach a new all time high at this point.  This could happen based on continued enthusiasm for Q3 earnings and revenues.  Q4 2018 and Q1 2019 are another story, as I’ve already shown you (see link just ABOVE labeled “HERE”).

Let’s check in on two signals we’ve been following:

“Intel-igent Market Timing Signal”:  Strongly Negative. And even worse this week as the stock was down 6 straight days in a row.  (Reminder: INTC is our “tell” on 2nd half earnings in tech as noted HERE.  The semiconductor index  (SMH) has broken below the 200 day moving average despite the bounce from the June low on Friday as I showed earlier on Friday HERE.  Chips are the life blood of economic growth around the world.  The weakness in SMH is a bad prognostic sign.

Bank of America (BAC) Market Timing Signal: Negative as it’s off a lower double high and a failed breakout.  There is a chance inflation could accelerate a bit longer, which could hold US rates up and hence hold the banks up, but it won’t last long, as global growth decelerates.

I warned last week that any “China hope” could cause the market to rally, and it did.  How long that will last is unclear.  Talks are supposed to resume by the end of August.  There could be new all time highs based on resolution of the trade disputes, but there is a bit of a cloud now too from the 2018 elections where the GOP seems to be in danger, particularly in the House.  Regardless of the color of the “Wave” (Blue or Red) about to occur in the  elections, the market will be nervous about the uncertainty.  Trump could be effectively neutered by the Democrats as Obama was by the Tea Party.

Keep up-to-date during the week at Twitter and StockTwits (links below)…

Follow Me on Twitter®  Follow Me on StockTwits®.

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

sp500-index-spx-market-timing-chart-2018-08-17-close

Still an up trend, and we’re staying with it for now.

Survey Says!  Sentiment of individual investors (AAII.com) showed a Bull minus Bear percentage spread of +7.09% vs. +5.33% last week.  Not at an extreme and neutrals are not high.   In the context of being close to all time highs, it’s a bit Bullish actually.  They should be elated near all time highs.

AAII.Com Individual Investor Sentiment Poll
Bulls Neutrals Bears
36.17% 34.75% 29.08%
Thurs. 12 am CT close to poll

2.  U.S. Small Caps Market Timing (IWM): Small caps are now at the top of the triangle.  Last week I said, “Follow the bouncing ball either way out of the triangle.” Same idea this week….  If you want to be very conservative, buy the breakout to a new all time high.  In any market pullback the beta of small caps can create greater losses.  If you believe the market is continuing to new highs and more, then by all means load up on small caps.

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

iwm-russell-2000-market-timing-chart-2018-08-17-close

Not out of the triangle.

3. Gold Market Timing (GLD):  Same explanation as last week covered in Section #3 HERE. There is room for more losses all the way back to the post-election lows or worse.

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

gld-gold-etf-market-timing-chart-2018-08-17-close

Gold still in down trend.

4. Interest Rate Market Timing – U.S. 10 Year Treasury Note Yield (TNX): I’ve been beating this drum for weeks.  The “dumb speculators” are on the wrong side of the trade expecting HIGHER rates, when we will be seeing lower rates in the US and elsewhere as global growth decelerates.  The delay is due to the fiscal stimulus in the U.S, which was inappropriate for this point in the economic cycle.  But they don’t teach Presidents economics, just nice tinkle down economic theories that have never worked, never without creating massive deficits as happened under both Reagan and G.W. Bush who were both big spenders.  Ronald Reagan created the first multi-TRILLION dollar deficits, as I wrote about HERE.  They are ALL guilty of spending money they did not have.  Congress is filled with fiscally irresponsible people with rare exceptions.

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

tnx-10-year-treasury-note-market-timing-chart-2018-08-17-close

Where are those high interest rates?

Now let’s review three key market timing signals together…. 

Do not use these signals as a trading plan.  They are rough guidelines.  I currently share my own moves on social media (links above).

MY SIGNAL AND TREND SUMMARY for a Further U.S. Stock Market Rally with Real GDP Growth (“real” means above inflation):

Stock Signal NEUTRAL for a further U.S. stock market rally with a Bullish SP500 Index trend. The small caps are a better indicator of the health of the economy, as they are most vulnerable to economic changes.  They need to signal their direction out of the current triangle shown above.  The VIX close on Friday at 12.64 is Bullish.   There is room for the VIX to fall to the sub-10 level.  Any move back above 13.31 again as happened this past week may indicate a developing Bearish trend.  A “test” doesn’t count.   This last spike was to 16.86, below the two previous spikes in volatility.

Gold Signal  GREEN for a further U.S. stock market rally with a BEARISH Gold Trend. 

Remember GLD is being used as an indicator for the ECONOMY here. 

Rate Signal RED for a further stock market rally with a BEARISH 10 Year Yield Trend.  Rates could remain range bound for a while depending on inflation numbers coming in the next few months. Then they should head lower.

This Bearish signal will be voided on a close of TNX above 3.035%.  As said before: “A more definitive rise above 3.035% would turn the rate trend back to Bullish for rates (bearish for bonds) This level of the 10 Year Treasury Yield, which is too high for current conditions as explained HERE, could eventually slow the economy.  The market seems to have adjusted to rates of up to 3% or so as said in the signal summary HERE.”

Note: I’ve updated my criteria for the equity signal for a further U.S. stock market rally to the following: GREEN = Bullish, YELLOW = Neutral, RED = Bearish.  In other words, the colors tell you whether the signal supports the stock rally or not, while the Bullish, Neutral, and Bearish designations are about the trend. 

NOTE: A BEARISH trend signal does not mean we should not buy.  A BULLISH trend signal does not mean you cannot sell some exposure.  It depends on what is going on in the economy and how oversold/overbought the market is at a given point whether the Bearish signal is to be sold, sold on the next bounce, etc. and whether a Bullish signal is to be bought or if profits should be taken.  A NEUTRAL trend signal does not mean the end of the Bull or Bear. It means to wait and look for possible subsequent entry points within the existing trend, Bull or Bear, but preserve capital if the entry fails.  Our strong intention is to buy low and sell high.  By the way, I will keep showing the prior orange “Trigger lines” in the charts for now as reference points only; they have historical value for us from the post-2016 election period.

Thank you for reading.  Would you please leave your comments below where it says “Leave a Reply”… or ask a question…  Pay it forward too by sending the link to MarketTiming.Blog (that link will immediately connect them to this webpage) to a relative or friend.  Thanks for doing that.

Be sure to visit the website for more general investing knowledge at:

Sun and Storm Investing™

Standard Disclaimer: It’s your money and your decision as to how to invest it.

I thank Worden Brothers for the charting system I use to post these charts.  If you want to know more about the charting system I use every day, go to my “Other Resources” page here:  Other Resources   It makes it much easier to follow along with me if you can see the charts and manipulate them on your own computer.  It’s a great investment to have an excellent charting system.  Check it out with a free trial at the link above.

Finally: Excuse and report all typos if you are so moved.  I do my best to pick up most of them, but have not always found them all.  Shoot me a comment (I don’t have to post your typo report as I filter them before publication, but I’ll be grateful to you!)

Copyright © 2018 By Wall Street Sun and Storm Report, LLC All rights reserved.

Posted in Bonds, gold, investment, investor sentiment, large cap stocks, S&P 500 Index, small cap stocks, Treasuries | Tagged , , , , , , , , , , , , , , | Leave a comment