Market Timing Brief™ for the 3-23-2018 Close: They’re Shooting the Stock Market Generals Now. How Low Will the Market Go? Gold Rallies as Rates Stay Tame.

A Market Timing Report based on the 3-23-2018 Close, published Sunday, March 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:  The title of the post indicates that the market was “coming after” the leaders of the big 2017 to early 2018 rally on Friday, stocks such as Amazon (AMZN) and Nvidia (NVDA).  Weaker stocks generally fall first and then the generals are taken down on a relative valuation basis.

Besides that, some negative things happened technically in the SP500 Index this week. 

1. The double top held its ground (no breakout), and the market slid below the 50 day moving average.  Remember, we don’t trade off that moving average, but rather, we just note it and then examine the behavior of the market when it is reached, so in some senses it does not matter a lot.  But one thing it does tell me is how long the market will require to heal when it violates it to the downside.

2. The upward Bearish Wedge was broken to the downside.

3. The Upper line forming the long term up channel was again violated to the downside.

4. The March 2nd low was easily breached.

5. The 200 day moving average is being retested now along with the longer term channel bottom (lower yellow line).

It is possible Friday marked the near term low in the market – possible.  In fact, if Trump et. al. came out early Monday and said “The Chinese are willing to negotiate a new trade agreement to avoid a mutually destructive trade war,” the markets would bounce hard.  This means shorting the current level of the market is risky if you are not being stock-selective about it.

A Bear could easily say the obvious target for the market is a complete or penetrating retest of the Feb. 6th low of 2532.69, which is just 2.15% from Friday’s close.  Often markets fall to these obvious levels before bouncing, so my working assumption is that this is the next target for a bounce (with an overshoot of some magnitude).

Let’s look at the chart and then look at lower targets…

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

sp500-index-spx-market-timing-chart-2018-03-23-close

Testing near the prior major low…

If that level holds, this will have been a C wave of an A – B – C wave formation.  If not, the next target could be the Fibonacci target mentioned last week HERE Write down that number – again, all market levels including Fibonacci levels are just guides and only trigger trades if the market set-up is right at the time.  Remember that after a relatively rapid decline of the past two days there is often follow-through based on margin calls and reactive discussions of “Should we get out honey?” across the households of America. I expect to see Jim Cramer on the Today Show again soon.  He’s 0ften there calming people down when volatility spikes.

Is this the beginning of a Secular (long term with losses greater than 25% generally) Bear Market? 

First, let me coin some new terms here if you would… Let’s call a shorter, shallower Bear Market within a Bull Market  a “Mini Bear Market” and let’s call a really big decline of well over 25% associated with recession, which is a Secular Bear Market a “Big Bear Market.”  And we’ll call Secular Bull Markets “Big Bull Markets” and cyclical Bull markets within long term Big Bear Markets “Mini Bull Markets.” 

It’s unlikely this is a “Big Bear Market” in the making, as profits should continue to grow this year, albeit at a slower rate.  The inflationary Trump tax policies (spending and tax cuts based on massive government debt) will help extend the Bull market further than it would have lasted otherwise.  Short term, there could still be some slowing, but the tax policies could make the dip in GDP growth and profit deceleration less severe at the cost of future inflation and higher borrowing costs, in my view.

The slowing profit growth alone could compress PE’s, but is not enough in my view to end the secular Bull market.  We could see further damage however than the approximately 10.3% drop from the January 26th closing high.

If we see a series of closing lows below the February low, meaning not just a quick intraday test below for example, we will then in my view be in a Mini Bear Market, and we’ll likely head to a significantly lower test, perhaps to the Fibonacci level mentioned.  You can find a number of other levels of support in prior price action, but they have little meaning in my view.  Around 2100 would be a loss of the entire post-Brexit gains (Brexit was bad for the U.K. and a blip for the U.S.).   That would be my next target below my Fibonacci target (see link above; it’s in last week’s post).

Another important question is “How do you know a ‘Big Bear Market’ has begun?”  The only way to truly front run a “Big Bear Market” is to predict the path of the economy.  Bear markets are strongly associated with recession, so looking out for GDP growth to slow is paramount in detecting the biggest market turns.

The slowing in China, Europe, and India into 2018 could spread to the U.S., but the U.S. will probably be hit later than those markets on an economic basis.  The Federal Reserve itself sees faster growth this year than they previously expected, but then sees a gradual decline of GDP over several years as noted HERE.  However, they are not predicting a recession, out to 2020 at least.  Profit recessions can cause cyclical “Mini Bear” Markets with drops of up to 25% or so, but Secular “Big Bear” Markets occur in recessions and result in drops of well over 25% (even 50% or much worse – for ex. the tech crash beginning of March 2000 in which the NASDAQ Index lost 78% of its value vs. the top).

The Fed GDP median prediction is shown below (link above to data).  The Fed sees inflation rising to 2.1% by 2020 and being at their target of 2% longer term.  Unemployment they say (as the median of the group) will fall from 3.8% this year to 3.6% for the following two years and then rise to the longer term rate of 4.5%.   That low rate could start to push up inflation over the next couple of years.

2018

2.7

2019

2.4

2020

2.0

Longer Term

1.8

The above data says to me that PE ratios could compress in a Secular Bear Market, but there is no Secular Bear in the picture out a few years at least. 

THE PLAN? Until GDP slowing rears its ugly head in a bigger way, we will need to find places to BUY LOW, SELL HIGH.  The risk?  Some say U.S. GDP will be declining in the third quarter of 2018, but that data does not include the influence of the Trump GOP tax cuts.  That quarter starts July 1st. If companies start downgrading projections earlier than that, the market may front run the weakness.  If we “buy low,” we may be needing to “sell high” faster than we think.  No one can tell you what the impact of the tax cuts will be until they see what people actually do with the money.

What about technical analysis of markets?  Does it provide a way to predict a Big Bear market?  Other than saying the market is sustaining more damage than it had previously, not really, but it does tell you when you should consider lowering exposure, particularly if you need cash for your kids’ college education or other proximate expenses.

In my view, you should have already lowered your exposure a bit, even if the Bull market is not over.  Why?  Because markets around the world are breaking down in unison now.  They were rising together just weeks ago.  I am betting the SP500 Index will test the Feb. low and if it survives there and other technicals look OK, I will likely add back some exposure.   If not, I will very likely lower my exposure even further, again, depending on the market set-up at the time.  That is why you may want to stay plugged into the social media connections shown below…   Things move fast when markets fall.  They often fall faster than they rise due to the rush to the exits.  Remember however, that it’s OK to add exposure and then quickly exit if a given low does not hold. 

At this point, I would not personally lower my exposure except to protect profits here and there.  Waiting for the next break makes more sense, but I understand that if you need the money sooner rather than later, you may want to sell some right away.  I am just telling you what I’m doing real time on social media.  I won’t be selling Monday intraday unless we end up falling below the Feb. low and that would be a very tricky trade intraday, because it could represent a capitulation followed by an immediate bounce.  Remember to make your own decisions.  Sometimes I’ve been early with buys by a day or more, which can be costly over the short term.  In 2015, I bought the drop on August 20th and was two days early.  The Flash Crash of 2015 happened on August 24th two days after that buy.  Eventually I was up big on the buy of course, but in the short term, there is an opportunity for losses when you move too soon!

I will consider the SPX to be in a Bearish Trend only if the Feb. low is violated on a close.  There is a Bearish set-up for the long 3rd wave down mentioned, but that obviously requires a breach of the Feb. low. 

Look through your portfolio and sell the weak stuff, particularly on the bounces and rotate into stronger markets.  For example, as Germany was breaking down, I sold exposure there and moved it to U.S. stocks and ETFs.  I did the same for Japan and “old China.”

See how much I’ve lowered my exposure at the social media links just below…

Keep up-to-date during the week at Twitter and StockTwits (links below), where a combined 33,400+ people are joining in…

Follow Me on Twitter®.  Follow Me on StockTwits®.

Survey Says!  Sentiment of individual investors (AAII.com) showed a Bull minus Bear percentage spread of +4.74% vs. +15.51 last week.  We still have not reached a sufficiently Bearish reading, even a moderately Bearish one, to say this sell-off is at or nearing the end.

AAII.Com Individual Investor Sentiment Poll
Bulls Neutrals Bears
33.23% 38.28% 28.49%
Thurs. 12 am CT close to poll

2.  U.S. Small Caps Market Timing:  Notice that small caps are not falling as fast as large caps toward their 200 day moving average.  Again, we are using that moving average as a marker, not a trading signal, unless everything else fits when we arrive there.  Small caps are more insulated from the Trump Trade War, being conducted primarily against China, while protecting allies.  This is a fact, and the market is reacting to this fact.

I would not call the Small Cap trend Bearish quite yet as there is a higher low (on Mar. 2) despite the double top. 

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

iwm-russell-2000-market-timing-chart-2018-03-23-close

Off a failed breakout. Not falling as fast as SP500 Index.

3. Gold Market Timing: Rates did not blast off after the Fed meeting, so gold rose as expected.  The dollar was only slightly lower though, and since CPI Y/Y is expected to rise into Q3 and Q4 per Bloomberg estimates, rates could rise again after falling a bit during this global stock market sell-off.  For the time being, I think rates will stay below 3% in the U.S.  If rates don’t fall substantially however, gold may remain range-bound (131.15 being the top), so protect any trading profits.

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

gld-gold-etf-market-timing-chart-2018-03-23-close

Gold rises on tame rates and slightly weak dollar.

4. Interest Rate Market Timing – U.S. 10 Year Treasury Note Yield (TNX):  Rates did stay put as I predicted they would.  Rates higher than the last high would hurt stocks.  They would (AT THIS TIME), lead to deflation.  Global Economic cooling should keep rates range bound for a while at least until U.S. inflation turns over from a peak in the 3rd quarter (per Bloomberg data).  My lowest target is that green line in the chart and my first target is the “Deflationary Rate” I defined HERE (in the top SP500 section).

The Federal Reserve is raising rates into a slowing world economy with rates falling in the rest of the world except for China as the major example, where things will be worse as they are raising rates with ours, while their economy slows.  This is bad for growth, especially in the “Old China” economy.  That slowing could start to hit the new economy in China later, so we’ll be watching stops!  And then the Federal Reserve will be forced to drop rates again as our economy slows.

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

tnx-10-year-treasury-note-market-timing-chart-2018-03-23-close

Coming down…but likely stuck in a range for a couple of quarters.

 Now let’s review the three 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 SUMMARY for a Further U.S. Stock Market Rally with GDP Growth and Low Inflation:

Stock Signal YELLOW with a Neutral SP500 Index trend.

Much more detail in the text above.

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. 

Explanation: Note that a RED signal does not mean we should not buy.  A GREEN signal does 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 profits should be taken.  YELLOW does not mean the end of the Bull or Bear. It means look for possible 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-election period.

Gold Signal  YELLOW with a Bullish Gold Trend

No changes from last week.  To Repeat: Remember GLD is being used as an indicator for the ECONOMY here.  A new recent LOW in GLD will turn the signal GREEN.  It’s a bit more complicated over the short term as rates above 3% are currently being taken as a negative by the markets.  Gradually rising rates can be fine for the economy, but not rates that rise too fast as important parts of the world economy slow. 

Rate Signal YELLOW with a Neutral 10 Year Yield Trend. 

To Repeat from last week: “Remember this too is a signal for a “further stock market rally” as it’s being used here.  Remember “Bullish” for yields is Bearish for bonds and vice versa. 

For the near term move, the bond setup is Bullish due to the wedge break.  Longer term, I expect rates to gradually rise as the recovery matures and the fiscal stimulus either wears off or forces the Fed to raise rates repeatedly due to inflation finally increasing.”

As said two weeks ago: “Remember that Goldilocks feelings (growth with relatively low rates) will vaporize if and when we return to a worldwide slowdown with deflationary fears.  Then rates would plunge, causing bonds to make big gains, gold to rally strongly, and stock markets to decline in a big way.  Remember that any rapid reset could hurt gold as well as liquidity is sought. “

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.

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

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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 3-16-2018 Close (3-21-2018 Update for SP500 Index): The Fed Will Drive the Markets This Week. Small Cap Growth Failed a Breakout. Gold Holding Key Support as 10 Year Yield Hovers Below 3%.

A Market Timing Report based on the 3-16-2018 Close, published Sunday, March 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: The President is still waging an undefined trade war with the rest of the world, and this has unsettled markets. 

This week there is something even more important to the markets and that is the first full Fed meeting accompanied by a televised news conference.  The new Federal Reserve Chair, Powell, must make the stance of the Fed clear to the markets.  A 0.25% hike in the Fed Funds rate is expected.  If he is more hawkish than previously believed, the markets will not like it.  The markets could react badly if he is too dovish too, as that would mean the Fed no longer has confidence in the trajectory of the economy as they previously envisioned it.  Although a negative reaction to increased dovishness is possible, my personal sense is that the markets will like a more dovish stance, as they already see the relative slowing of Europe and China.  The best case is that is is a bit more dovish than before, but not dismally dovish.

As far as the chart goes, there are two Bearish features that must be overcome for the Bulls to re-top this market.  1. A rising wedge, which is Bearish until the market cuts above the top magenta line and 2. The double top, which must be overcome to avoid turning down into a C wave down in an A – B – C wave pattern or even worse, into a 3rd Fibonacci wave or “Wave 3,” which is classically 1.618 (min.) times the Up 2nd wave.  That would mean a drop of 415 points from 2789.15, which would bring the market to 2374.  These numbers must be confirmed by examining the behavior of a market once it reaches them.

What would bring us there?  Perhaps slowing in the rest of the world detracting from U.S. multinational growth.  Furthermore, if the U.S. economy continues to strengthen ahead of the rest of the world, the dollar will strengthen and our goods will be less competitive.  Earnings come down in that situation as foreign money buys less in U.S. dollar terms.

There is also a Bullish view of the chart that says the yellow line marking the last two highs plus the lower magenta line represent an ascending triangle, which is normally seen as Bullish.  The combination of the wedge and double top bring this into question.  Better to follow the trade in the direction of the next swing!

UPDATE 3-21-2018: A further Bullish view that has developed over the past two days is that the current consolidation is at the 50% retracement level of the entire move down in Jan.-Feb., but more importantly, this low matches the 2-21/2-22-18 low (left shoulder), which forms an inverse head and shoulders on the chart, which could drive the market to a new all time high.  The Head is 3-2-2018 and we are now forming the second inverted shoulder.

What’s the best case scenario?  Trump tax cuts are borrowing future purchases into the present (companies can write off investments in one year), so U.S. growth could be stronger than the rest of the world for a while before demand starts falling fast as the impact of tax changes wears off.  But until that time, earnings could remain strong and even surprise analysts.  For this reason, the markets could have further to go, in spite of Fed worries that may arise this week.  Low corporate taxes could spur further growth and extend the economic cycle even further before the next secular slowdown.

When it comes, the next slowdown will be “big,” so we must watch the exits, even if, and as I expect, the markets continue to rise.   Jeremy Grantham was quoted as saying large-cap U.S. stocks will return NEGATIVE 4.6% per year over the next seven years without taking inflation into account.  Not good.  And the next downturn could last far longer than 7 years. No reason to “get out” now, but a reason to be very alert to changes in the economy.

You can check my investment stance in exposure terms at the social media links below…  And now, let’s look at small caps.

Keep up-to-date during the week at Twitter and StockTwits (links below), where a combined 33,400+ people are joining in…

Follow Me on Twitter®.  Follow Me on StockTwits®.

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

sp500-index-spx-market-timing-chart-2018-03-16-close

Rising wedge and double top are Bearish unless the Bulls can rally above both.

Survey Says!  Sentiment of individual investors (AAII.com) showed a Bull minus Bear percentage spread of +15.51 vs -1.98% last week.  Note the high “Neutrals” level, which is predictive of a higher market 6 months out (about 80% odds per AAII).  The spread level itself is not helpful as it’s only mildly to moderately Bullish.

AAII.Com Individual Investor Sentiment Poll
Bulls Neutrals Bears
36.84% 41.83% 21.33%
Thurs. 12 am CT close to poll

2.  U.S. Small Caps Market Timing:  Since the 2-27 high, IWO is leading IWM and IWN is last, while all three have beaten SPY.  Since the 3-13 high, IWN is beating IWM, which is stronger than IWO, with all three again beating SPY, but only since Friday.  IWO is below its prior high of 198.30 at a Friday close of 198.21, so barely below it.  There is an opportunity to make a new all time high if the Fed comments are taken well.  If not, down we go.  Achieving a new high close before the Fed meeting ends on Weds. would be impressive. 

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

iwm-russell-2000-market-timing-chart-2018-03-16-close

Small Caps off their prior high, but small cap growth is barely below the prior high.

3. Gold Market Timing: Rates down, dollar down, gold up.  Same old dance.  If the Fed reaction is rising rates this Weds., gold will fall below support.

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

gld-gold-etf-market-timing-chart-2018-03-16-close

Waiting for the Fed now.

4. Interest Rate Market Timing – U.S. 10 Year Treasury Note Yield (TNX):  I stick by this: Rates must move down from here for stocks and gold to continue upward.  CPI turned out to be flat Y/Y in this week’s report, so rates simply hovered near the prior 3% cap.  Any move above 3% would be taken badly by the markets in the near term.  Over the longer term, rates will move back above 3% due to Trump’s inflationary tax and tariff policies.

Avoiding a Big Third Wave Down:

So what must happen for the SP500 Index to move still higher rather than rolling over, resulting in another DOWN wave?   Same list as last week.  Read it HERE (near bottom in section #4).  Add to that list “The Fed must be neutral to incrementally more dovish.”

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

tnx-10-year-treasury-note-market-timing-chart-2018-03-16-close

Rates above 3% will choke the stock market.

 Now let’s review the three 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 SUMMARY for a Further U.S. Stock Market Rally with Low Inflation:

Stock Signal YELLOW with SP500 Index Neutral

Turned yellow from Green as it’s based on small caps that must make a new high to become Bullish again.  Follow IWO as a more sensitive indicator this week.

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. 

Explanation: Note that a RED signal does not mean we should not buy.  A GREEN signal does 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 profits should be taken.  YELLOW does not mean the end of the Bull or Bear. It means look for possible 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-election period.

Gold Signal  YELLOW in a Bullish Gold Trend

Remember GLD is being used as an indicator for the ECONOMY here.  A new recent LOW in GLD will turn the signal GREEN.  It’s a bit more complicated over the short term as rates above 3% are currently being taken as a negative by the markets.  Gradually rising rates can be fine for the economy, but not rates that rise too fast as important parts of the world economy slow. 

Rate Signal YELLOW with a Bullish 10 Year Yield Trend.  Remember this too is a signal for a “further stock market rally” as it’s being used here.  Remember “Bullish” for yields is Bearish for bonds and vice versa. 

For the near term move, the bond setup is Bullish due to the wedge break.  Longer term, I expect rates to gradually rise as the recovery matures and the fiscal stimulus either wears off or forces the Fed to raise rates repeatedly due to inflation finally increasing. 

As said last week: “Remember that Goldilocks feelings (growth with relatively low rates) will vaporize if and when we return to a worldwide slowdown with deflationary fears.  Then rates would plunge, causing bonds to make big gains, gold to rally strongly, and stock markets to decline in a big way.  Remember that any rapid reset could hurt gold as well as liquidity is sought. “

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.

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 Bitcoin 3-12-2018: How Could This Bitcoin Bear Market End?

A Market Timing Report based published Monday, March 12th, 2018

I deliver focused comments on market timing once or twice a week.  These are supplemented with daily “Tweets/StockTwits” (see links below).  If you are not interested in bitcoin, see my latest post by scrolling down to the SP500 section HERE. Thank you.

Is Bitcoin Falling or Rising?  How Could This Bitcoin Bear Market End?

The overall trend could still be considered down as I’ll show you, despite a resolution of the previously charted downward wedge to the upside.  The break of that wedge to the upside was positive for sure.  That led to the short term bounce to a lower high from the Feb. low. What is needed to change the big trend is a daily chart higher high, and that new high must stick; it cannot be a failed market timing breakout as we saw back in early 2018.

The good news from a Fibonacci market timing perspective is that we’ve had wave 1 down, a double 2nd wave up, a 3rd wave down to the Feb. low, a double 4th wave, and now we could be completing a 5th wave down which would be most effective in supporting a new up trend if it hit that Feb. low again or even went a bit lower.  That would be a full retest with capitulation.  A reversal back above the Feb. low OR a bounce off that low would complete the latest Bitcoin Bear Market.

Added 3-29-2018: A fifth wave can extend LOWER than the Feb. low [6001 on Bittrex; that # varies by exchange].

A final “Bullish Way Out” is viewing the low preceding the second circle from the left as an inverted shoulder, the Feb. low as an “inverted head,” and the late Feb. low as an inverted right shoulder, the whole picture being called a reverse head and shoulders formation.  The last little dip was a retest of the inverted shoulders, and for now, bitcoin remains above that level.  As long as bitcoin advances from here and does not fail at those inverted shoulders (drop below them), this reverse head and shoulders formation could lead to a rally back to 17.500 or so.  That is the most Bullish scenario from here…

In the meantime, if we see such a rally, I would risk manage your bitcoin (and ALL cryptocurrencies) as I outlined previously HERE.

BTC-bitcoin-market-timing-chart-2018-03-12-1019am

Series of lower double tops, one after another.

Keep up-to-date during the week at Twitter and StockTwits (links below), where a combined 33,300+ people are joining in…

Follow Me on Twitter®.  Follow Me on StockTwits®.

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.

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.

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

Posted in Cryptocurrency, investment, trading | Tagged , , , | Leave a comment

Market Timing Brief™ for the 3-09-2018 Close: The Four Things Required for the SP500 Index to Move Higher. Small Cap Growth Liftoff. Gold Pausing at Feb. Low. Rates On the Line.

A Market Timing Report based on the 3-09-2018 Close, published Sunday, March 11th, 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: I used market timing and deployed more cash near the low on 3-01 and 3-02, and a bit more on 3-06, and very little on 3-07 to add to a prior buy in a tech stock mentioned at the social media links below.  This Friday’s close gives us a very interesting set-up, because three of four markets are “On the Line,” including the SP500 Index, gold and interest rates, while IWM is stronger as I explain in detail below.  

A key part of the Bull set-up is this: TNX would ideally hold below 2.897% (on Friday I said 2.895%, but I’d allow the former), and definitely must hold 2.925% or we have a re-topping of the prior high in the 10 Year Treasury Yield and a risk of even higher rates.  That would be taken badly by the equity markets around the world, because, as I wrote HERE, the market has already decided that even the rates we have now are on the restrictive side.

I revealed the “tripwire” market timing number HERE (the rate above which the market became disturbed).  Would the economy die at the current rates?  No, but the reaction to the market when we made the climb to these levels was telling as I’ve explained.  I believe current U.S. rates may actually be a bit too restrictive relative to prior conditions considering the slowing of economic data particularly in Europe, but also in China and Japan.  HERE is a graph of Japanese GDP that appears to be rolling over from lower highs (click on the 5 year view).  The annual numbers look OK, but they are likely topping out now.  Sell high, buy low. That is what I coined as “Passive Shorting™” HERE.

I have closed out some foreign exposures aggressively, moving that exposure back to the strongest U.S. sectors.  You can see what I do every day at the links just below…

Want the Bullish technical view for SP500 Index market timing?  Note the magenta lines.  They form an up trend that could continue, and we are only at the middle of that up trend, not at the top yet.  The next decline could in fact occur at the upper magenta line, not at the current possible double top with the prior daily high.  I will admit, I could have included the “swoon low” in the lower magenta trend line, and had I done so, you’d see an upward wedge, which is Bearish.  For now, I’ll wait for a new high above the 2-27 high.

Keep reading, because in the last section I’ll reveal the exact sequence of events I want to see in the charts early in the week for the market to pivot UP rather than down from here.  Make no mistake (as GW would say), this is a key pivot point.

Keep up-to-date during the week at Twitter and StockTwits (links below), where a combined 33,400+ people are joining in…

Follow Me on Twitter®.  Follow Me on StockTwits®.

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

sp500-index-spx-market-timing-chart-2018-03-09-close

Up or down from here? Small cap growth and tech say UP.

Survey Says!  Sentiment of individual investors (AAII.com) showed a Bull minus Bear percentage spread of  -1.98% vs. +13.87 last week.  We still have not reached the sentiment spread lows of the prior Flash Crashes (see previous issue).  I don’t think that is lethal, but it’s one point of caution when investors don’t turn Bearish enough on downturns.  I would not use this fact to bet against a re-topping of the SP500 Index however.

AAII.Com Individual Investor Sentiment Poll
Bulls Neutrals Bears
26.40% 45.21% 28.38%
Thurs. 12 am CT close to poll

2.  U.S. Small Caps Market Timing: Insulation from a possible US Tariff War, at least in direct terms, is clearly helping the small caps.  When I say “small caps,” let me be clear that although IWM (small caps; Russell 2000) did better than the SP500 Index off the top and off the 2-08 closing low, it was IWO (small growth) that won.  IWO also beat IWN (small value) off the 1-26 top.  IWO is also leading and closed at an ALL TIME HIGH on Friday (IWM is shown in the chart below and is weighed down by IWN stocks).

The remarkable thing is small growth (IWO) did not drop as far on a closing basis as did SPY in the big decline.  This is not the usual relationship of the two at bottoms. Usually small caps overshoot to the downside due to their lower floats and higher beta.  Even if you step back to the pre-election low and look at returns to today, small cap growth has given large cap tech (XLK) a run for it’s money.  Big tech won over small growth over that period, but small caps still nicely outperformed the S&P 500 Index (SPY). 

Bottom line?  Buy small growth when the economy is growing if you are going to put assets into the small cap space.  Buy pullbacks.  Don’t chase!

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

iwm-russell-2000-market-timing-chart-2018-03-09-close

Stick with small cap growth if you buy small caps. Buy pullbacks only.

3. Gold Market Timing: Rates, if contained and then falling as discussed, will mean down dollar and up gold.  If not, gold will do poorly. 

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

gld-gold-etf-market-timing-chart-2018-03-09-close

Rates must fall for gold to rally. The dollar in turn must weaken.

4. Interest Rate Market Timing – U.S. 10 Year Treasury Note Yield (TNX):  Rates must move down from here for stocks and gold to continue upward.  We get CPI and PPI data out next Tues. and Weds. respectively.  Those numbers could have a big impact on the current chart.  Nonfarm Unit Labor Costs rose a brisk 2.5% quarter over quarter, but for 2017 they were up only 0.4% after rising 1.1% in 2016 as noted HEREHigher wage pressure was the theme during the recent decline, so we’ll see if that translated into CPI measured inflation or not.  Heads up on Tuesday morning!

Avoiding a Big Third Wave Down:

So what must happen for the SP500 Index to move still higher rather than rolling over at a double lower top, resulting in a big third DOWN wave? 

  1. Rates must stay below my numbers (noted above) and then decline.  The first decline could be contained by the prior breakout of 2.621%.  That is also the base of the broken wedge.
  2. The U.S. dollar weakens a bit OR stays flat.  Assets moving into the U.S. for better treatment due to Trump tax reform at the corporate level and flight from weaker stock markets/economies could both help keep the U.S. dollar from falling dramatically.  There is a limit to how low the dollar can go now, as Europe is already slowing; hence, the Euro will likely fall and keep the dollar up.  If Europe slows too much it could drive the U.S dollar up too much and hurt U.S. multinational profits over the short to intermediate term.  The U.S. stock market (esp. large caps) is most vulnerable now to strength in the U.S. dollar, which could come rising US rates (not what I favor) OR from Eurozone/China/India slowing.  Money jumps from the the weakest to the strongest economies.  The latter would be good for the U.S stock markets unless worldwide slowing is so pronounced as to significantly impact U.S. corporate profits.  This hurts multinational large cap stocks the most.  
  3. The SP500 Index needs to rise above the 2789.15 high on 2-27-2018.
  4. Current market leadership must continue higher. That means XLK and IWO must make higher highs.

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

tnx-10-year-treasury-note-market-timing-chart-2018-03-09-close

Rates must fall now or stocks will likely turn lower.

 Now let’s review the three 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 SUMMARY for a Further U.S. Stock Market Rally with Low Inflation:

Stock Signal GREEN with SP500 Index Neutral

Wow, this held up for another week: Last week I said: “The SP500 Index must rise above 2789.15 to turn Bullish again.  Right now the pessimistic view is that we’ve formed a lower high on the chart above.”  The signal is GREEN because it’s based on small cap performance.  Small caps are back in an up trend already, and IWO is at an ALL TIME HIGH!  This set-up of both TECH and small cap growth at new highs is itself Bullish for the SP500 Index.  But the proof will come early in the week, perhaps after tame CPI data, if that occurs. 

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. 

Explanation: Note that a RED signal does not mean we should not buy.  A GREEN signal does 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 profits should be taken.  YELLOW does not mean the end of the Bull or Bear. It means look for possible 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-election period.

Gold Signal  YELLOW in a Bullish Gold Trend

No big change from last week: Remember GLD is being used as an indicator for the ECONOMY here.  Gold coming off a major high is GREEN for the economy and the stock market.  The signal is NOT a gold signal here.  A great economy should mean higher rates, dollar up, and gold down except when inflation is not being headed off by the Fed.  Then gold can rise despite the stronger economy.  I suspect gold will start rising again and the signal will turn red as rates continue to FALL, and the dollar continues to fall or stay about flat in turn (read above for more).  The signal will be back to RED when GLD makes a new recent high.

Rate Signal YELLOW with a Bullish 10 Year Yield Trend.  Remember this too is a signal for a “further stock market rally” as it’s being used here.  The Bearish wedge break shown above is critical here and that’s where the “yellow” signal arises.  Rates are falling for the short term at least in my view.  Remember “Bullish” for yields is Bearish for bonds and vice versa. 

For the near term move, the bond setup is Bullish due to the wedge break.  Longer term, I expect rates to gradually rise as the recovery matures and the fiscal stimulus either wears off or forces the Fed to raise rates repeatedly due to inflation finally increasing.  “Bearish” for the 10 Year Yield would be a fall in the 10 Year Yield below the prior important highs of 2016 and 2017. 

Remember that Goldilocks feelings (growth with relatively low rates) will vaporize if and when we return to a worldwide slowdown with deflationary fears.  Then rates would plunge, causing bonds to make big gains, gold to rally strongly, and stock markets to decline in a big way.  Remember that any rapid reset could hurt gold as well as liquidity is sought.  

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.

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 3-02-2018 Close: SP500 Volatility On the Edge. Gold Must Hold February Low. Rates Still Falling.

A Market Timing Report based on the 3-02-2018 Close, published Sunday, March 4th, 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: We are still in a period of higher volatility, but on the edge of a very significant turn.  I liked what I saw in a VIX breakdown from the Thursday high on Friday.  The VIX Volatility Index rose to a new high and fell, but the catch is that although the VIX moved below the prior day’s low, it did not close at a new low.  I don’t like it when I see the trading of a market is too “cute.”  Regardless, the VIX needs to continue imploding Monday to continue the current rally; otherwise, we are headed into a sloppier trading trajectory, and a busier market timing scenario.

If Trump pushes the Tariff War into a true World War of Trade, the market could react much more negatively.  Aside from that, the U.S. economy appears to be on track and have more upside given the corporate and, to a lesser extent, the individual tax cuts.  If that were not the case, I would have lowered my U.S. exposure much more and left it lower.  On Friday I added more exposure to the tech sector of the SP500 Index (XLK) during the pullback.  It looked like the winner out of the 11 sectors at least for the near term. 

I still have some cash on hand in case the POTENTIALLY higher low we’ve just seen does not in fact work out (I update my exposure to the market in relative terms so you can “adjust to taste,” on social media when I either buy or sell (see links below)).  If the VIX does not break the lows of the past two days within a day or so, we will see either a full retest of the prior low or worse.

Keep up-to-date during the week at Twitter and StockTwits (links below), where a combined 33,400+ people are joining in…

Follow Me on Twitter®.  Follow Me on StockTwits®.

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

sp500-index-spx-market-timing-chart-2018-03-02-close

The bounce must continue.

Survey Says!  Sentiment of individual investors (AAII.com) showed a Bull minus Bear percentage spread of  +13.87 vs. +21.86 last week.  How low did sentiment go after the prior 2 Flash Crashes?   After #1 (review them HERE), it hit -21.1% and -36-1% spreads after the crash day.  Both of those occurred near the lows in the market following the Flash Crash.

What about Flash Crash #2?  After that one, the spread bottomed at -11.8%, again fairly close to the low in the S&P 500 Index.  The low hit this time was 2.0% for the poll closing 2-07-18.  That day’s close was at -6.6% from the top vs. the biggest intraday drawdown of  -11.75%.

I would have liked to have seen a lower sentiment low after the fall we’ve experienced from the highs, but perhaps it’s too much to expect considering the speed of the VIX rise and fall.  I don’t think sentiment provides much of an edge in assessing where the market is compared to when we saw the excess Bullishness in the Jan. 3rd report that fueled the rise to the Jan. 26th high in the SP500 Index.

AAII.Com Individual Investor Sentiment Poll
Bulls Neutrals Bears
37.28% 39.31% 23.41%
Thurs. 12 am CT close to poll

2.  U.S. Small Caps Market Timing: The lack of a US Tariff War impact, at least in direct terms, may be helping the small caps to outperform the large caps off the last low.  Interest rates will be falling somewhat, not rising per the consensus (see my interest rate section below), which could impact the financial component of the Russell which stands at about 18.1% as of March 1st.  That upper green market timing line may be a point that Bears enter to attack.  Stick with IWO (growth) over IWN (value) for now, as growth is favored in a growing economy.

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

iwm-russell-2000-market-timing-chart-2018-03-02-close

Small caps are leading large back up to the prior high.

3. Gold Market Timing: Gold has a chance to bounce as the dollar falls on falling U.S. interest rates.  That’s the way the dance goes…  All bets are off if…well, I explain that IF below…

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

gld-gold-etf-market-timing-chart-2018-03-02-close

Gold should rally if the dollar continues its fall.

4. Interest Rate Market Timing – U.S. 10 Year Treasury Note Yield (TNX): I told you last week the next Wall Street “Story” will be about the “Goldilocks Scenario” where interest rates head lower, while growth continues.  Remember just a couple of weeks ago the worry was and is still for some, INFLATION, not lower interest rates!  Pay attention to what markets are DOING and to what economies are DOING, not where the Crystal Ball readers tell you they are going.  The Federal Reserve, even with their unlimited resources compared to most prognosticators cannot even get it right!  They recently had a special meeting aimed at helping them understand inflation better.  They’ve been off target with their predictions for years, and they don’t understand why that is!

Hear this “good and clear,” and you’ll save yourself a LOT OF MONEY:  Anyone who says they know where the economy or the stock market will be 1 year from now is a fool.  Don’t trust them.  Risk managing based on valuation levels and sentiment levels I can deal with, but only within a range of guesses.  They are still just guesses.  When I choose certain sectors or countries to invest in, I am only doing it with an awareness (as best I can achieve it) of what the charts and economics are saying NOW/in the near future (1-3 months).  When the economies change for the worse, I get set to exit, and when the charts change, I exit. That is the point of market timing.  

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

tnx-10-year-treasury-note-market-timing-chart-2018-03-02-close

Rates falling again following break of the wedge.

 Now let’s review the three 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 SUMMARY for a Further U.S. Stock Market Rally with Low Inflation:

Stock Signal YELLOW with SP500 Index Neutral

The SP500 Index must rise above 2789.15 to turn Bullish again.  Right now the pessimistic view is that we’ve formed a lower high on the chart above.

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. 

Explanation: Note that a RED signal does not mean we should not buy.  A GREEN signal does 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 profits should be taken.  YELLOW does not mean the end of the Bull or Bear. It means look for possible 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-election period.

Gold Signal  GREEN in a Bullish Gold Trend

No big change from last week: Remember GLD is being used as an indicator for the ECONOMY here.  Gold coming off a major high is GREEN for the economy.  The signal is NOT a gold signal here.  A great economy should mean higher rates, dollar up, and gold down except when inflation is not being headed off by the Fed.  Then gold can rise despite the stronger economy.  I suspect gold will start rising again and the signal will turn red as rates continue to FALL, and the dollar continues to fall in turn.  The signal will be back to RED when GLD makes a new recent high.

Rate Signal YELLOW with a Bullish 10 Year Yield Trend.  Remember this too is a signal for a “further stock market rally” as it’s being used here.  The Bearish wedge break shown above is critical here and that’s where the “yellow” signal arises.  Rates are falling for the short term at least in my view.  Remember “Bullish” for yields is Bearish for bonds and vice versa. 

For the near term move, the bond setup is Bullish due to the wedge break.  Longer term, I expect rates to gradually rise as the recovery matures and the fiscal stimulus either wears off or forces the Fed to raise rates repeatedly due to inflation finally increasing.  “Bearish” for the 10 Year Yield would be a fall in the 10 Year Yield below the prior important highs of 2016 and 2017. 

Remember that Goldilocks feelings (growth with relatively low rates) will vaporize if and when we return to a worldwide slowdown with deflationary fears.  Then rates would plunge, causing bonds to make big gains and gold to rally strongly. 

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.

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 2-23-2018 Close: The Volatility Implosion: Why Retest Risk Has Fallen. Next Move Will Likely Be Rates Down, Gold Up.

A Market Timing Report based on the 2-23-2018 Close, published Sunday, February 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: Is the market timing retest risk entirely gone?  I cannot say that, but I’ll show you this week that although volatility rose in an unprecedented way (fastest weekly drop in the stock market on record), it has also dropped in an equally impressive way, which may have largely negated the retest risk.  Any outside event like a move by Special Prosecutor Mueller on Trump himself could derail the bounce.  We cannot fall asleep on our positions, no.  But we can sleep at night.

Let’s look at the most powerful view of the VIX ramp up and down by looking at the ratio of the Deceleration Rate to the Acceleration Rate.  What you see is the Deceleration Rate : Acceleration Rate ratio for the VIX during what I’m calling “Flash Crash 3” (the recent one) was over EIGHT times that we saw in 2010 and over 5 times that seen in 2015’s Flash Crash.  That is what I’m calling a “VIX Implosion.” 

Date VIX / Day (Accel)
Decel/Accel vs 2010 vs 2015
1/4/2018 1.254 1.561 8.626 5.135
4/12/2010 0.845 0.181 0.116  vs 2018
8/6/2015 2.356 0.304 0.195  vs 2018

Here is the VIX DECELERATION DATA:

VIX Deceleration
VIX/Day vs 2010 vs 2015
2/6/2018 -1.958 12.794 2.733
5/21/2010 -0.153 7.82%
8/24/2015 -0.716 36.59%

Given the much faster decay of the VIX to levels I pointed out on social media are similar to points far into the 2010 and 2015 recoveries (near the SP500 Index high prior to the fall of the market or beyond….see the social media links), and VIX moved to a new recent low on Friday , I was convinced of enough of a shift in the market to increase my SP500 Index exposure further.  I share my exposure levels on social media, and you can find them at the links just below (adjust to taste).

We also can see that the trend is still up.  The last significant low was in August 2017 and we stayed far above that even on this pullback.  We are back above the prior channel line, so what I’ve called the “Tax Bill Reset” is back.  I am staying long with above average exposure for now to the U.S. markets.

We are also just above the 50 day moving average, which is not a useful trading signal by itself, because it flashes on and off so much, but it’s a goalpost investors consider.  “Being above it is helpful” is saying enough.

The next market timing step is to climb to a new high above the prior intraday highs of this consolidation.  We are at the top of a sloppy consolidation, which is my remaining hesitation, that along with the lack of good volume on Friday in SPX (S&P500 Index), which was lower than the volume on every other day of the bounce, including down days.

Monday must show further follow through to the upside above the recent range.  That’s the main catch on the shift to the “maybe no retest after all” hypothesis, and the reason that I have a bit of extra cash vs. prior without reducing my exposure too much.  It is because I expect the market to run higher as it works through this period of higher volatility, retest or not.  

Keep up-to-date during the week at Twitter and StockTwits (links below), where a combined 33,400+ people are joining in…

Follow Me on Twitter®.  Follow Me on StockTwits®.

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

sp500-index-spx-market-timing-chart-2018-02-23-close

Retest risk has fallen, though not to zero. was

Survey Says!  Sentiment of individual investors (AAII.com) showed a Bull minus Bear percentage spread of  +21.86 vs +27.11% last week.

That is still a fairly high Bullish number to see so soon after the fastest 10% correction in stock market history.  This is one more bit of evidence that investors really never changed their overly Bullish stripes during this correction.  By being the fastest correction ever and now becoming the fastest VIX Implosion in a years (can’t say more simply because I did not go back prior to the Flash Crashes), there is some residual risk of not having enough skeptics and Bearishness in the individual investor side of the market.

AAII.Com Individual Investor Sentiment Poll
Bulls Neutrals Bears
44.65% 32.56% 22.79%
Thurs. 12 am CT close to poll

2.  U.S. Small Caps Market Timing: The small cap bounce has been sub-par compared to large so far as the chart below shows.  I don’t want to have IWM exposure with it’s implicit banking exposure as rates fall from here, my favored scenario as detailed before.  IWM is just 0.07 points above the 50 day moving average.  It will take a rise above the consolidation high on 2-21-2018 and then a move above the left shoulder at 155.41 to greatly increase the odds of a return to the prior market timing high. 

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

iwm-russell-2000-market-timing-chart-2018-02-23-close

Small caps still weaker than large.

3. Gold Market Timing: The US dollar rose last Tuesday and gold fell in response, as I indicated it would.  Since then, the move has been a sloppy sideways move by GLD, which means a consolidation.  I favor that rates move down from here, which would further hurt the US Dollar and help gold.  If rates do the opposite and make a new recent high, gold and the dollar will move accordingly (down/up).  It’s not too complicated at the moment.  The only time we tend to see dollar up/gold up is in full on financial crisis and that is because the U.S. Dollar and specifically Treasuries are considered a safe haven.  At least in 2018 they are!  China is actively trying to change that.

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

gld-gold-etf-market-timing-chart-2018-02-23-close

Gold down as the dollar bounces a bit, a move that may NOT continue.

4. Interest Rate Market Timing – U.S. 10 Year Treasury Note Yield (TNX): I said last week : “Rates will come down from here or from 3% as an outside possibility.”   The Bearish upward market timing wedge was broken by TNX on Friday as the chart shows you.  I believe the 10 Year Yield will now retest that green line at 2.621% at least. The “Rate Shock” was the reason for the high volatility correction in my view as expressed in the issue HERE.   Read that issue if you have not, as you won’t know what hit you if rates move up again, instead of down.  That is NOT my preferred scenario, but we always want to be prepared to think clearly if things move in the opposite direction to the analysis.

The 10 Year Treasury Yield must descend below and then stay below my “Secret Number” which I revealed in the issue HERE, which is just above the green line on the chart below.  Above that number, the market will continue to perceive the risk of DEFLATION due to an economy being crushed by high rates, which is just as bad as an inflationary spiral.

Here’s another key insight: As rates fall, the main stream media will start talking about how we are entering a “Goldilocks Period.”  They love “Goldilocks.” 😉  It’s one of their favorite stories.  Here’s the trick up her sleeve though.  Even Goldilocks knows that if rates go too low, the market is actually fearing DEFLATION, not the INFLATION we were told to fear earlier.  This can occur if the slowing already being detected in Europe and China is imported into the US.  For now, the US is better positioned, which is why I moved more of my exposure to the U.S.  The “world economy” is no longer so wonderful.  As one example, you can see by the data Germany’s economy is NOT growing much and may in fact be contracting: HERE.

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

tnx-10-year-treasury-note-market-timing-chart-2018-02-23-close

Rates falling again. Wedge broken.

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

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

MY SIGNAL SUMMARY for a Further U.S. Stock Market Rally with Low Inflation:

Stock Signal YELLOW with SP500 Index Neutral

I will change this to green when the new high occurs above the current consolidation range for BOTH SPX/SPY and RUT/IWM.  I favor UP over down at this point, but have some extra cash as said.  My exposure level is given on the social media streams (links above). 

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. 

Explanation: Note that a RED signal does not mean we should not buy.  A GREEN signal does 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 profits should be taken.  YELLOW does not mean the end of the Bull or Bear. It means look for possible 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-election period.

Gold Signal  GREEN in a Bullish Gold Trend

Remember GLD is being used as an indicator for the ECONOMY here.  Gold coming off a major high is GREEN for the economy.  The signal is NOT a gold signal here.  A great economy should mean higher rates, dollar up, and gold down except when inflation is not being headed off by the Fed.  Then gold can rise despite the stronger economy.  I suspect gold will start rising again and the signal will turn red as rates FALL.  The signal will be back to RED when GLD makes a new recent high.

Rate Signal YELLOW with a Bullish 10 Year Yield Trend.  Remember this too is a signal for a “further stock market rally” as it’s being used here.  The Bearish wedge break shown above is critical here and that’s where the “yellow” signal arises.  Rates are falling for the short term at least in my view.  Remember “Bullish” for yields is Bearish for bonds.  For the near term move, the bond signal is Bullish due to the wedge break.  Longer term, I expect rates to gradually rise as the recovery matures and the fiscal stimulus either wears off or forces the Fed to raise rates repeatedly due to inflation finally increasing. 

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.

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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.

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 Bitcoin 2-20-2018: Headed Down in Channel on Arithmetic Chart.

A Market Timing Report based published Tuesday, February 20th, 2018

I deliver focused comments on market timing once or twice a week.  These are supplemented with daily “Tweets/StockTwits” (see links below).  If you are not interested in bitcoin, see my latest post on US markets and gold HERE. Thank you.

Bitcoin broke above the prior wedge noted here on our last review and reached around 12,000 (11,718 on Coinbase). This is the old chart before the breakout to that 12K level:

BTC-bitcoin-market-timing-chart-2018-02-14-200pm

Must keep going up through that top line or else…

But note that when I plotted bitcoin using an arithmetic chart vs. a log chart as above, the channel “being used” shows up!  Voila!  The decline represents a reversal of the prior breakout as well as a failure to penetrate the downward channel to the upside.  It is quite possible that bitcoin will now head to a brand new low, possibly at the base of the channel shown, which is as you see, below 5000.  That would be a shock to bitcoin holders without a doubt.  Risk manage your holdings as I’ve suggested HERE.

BTC-bitcoin-market-timing-chart-2018-02-20-1151pm

Perfect place to fail.

Stay tuned… Keep up-to-date during the week at Twitter and StockTwits (links below), where a combined 33,300+ people are joining in…

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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.

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.

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

Posted in Cryptocurrency, investment, trading | Tagged , , , | Leave a comment