Market Timing Brief™ for the 8-03-2018 Close: Trouble Ahead? SP500 Revenue Growth Rate Estimated to Drop by 42% into Q2 2019. Gold on 2017 Lows. Rates Falling Again.

A Market Timing Report based on the 08-03-2018 Close, published Sunday, August 5, 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):

U.S. small caps are still struggling, sitting just above their 50 day moving average as you can see in the second chart below.  Remember, we don’t use these moving averages as trading signals generally, just reference points for strength vs. weakness.

Mid caps rose and are just below an important prior high of 199.91 for IJH, closing at 199.75. That’s called re-topping.

The large cap SP500 Index ETF SPY tested below 280.41, which was the March high, and has since recovered.  Along with this recovery, the VIX dove below our key target (13.31).  Despite that, you can see in the chart the SP500 is above the 2017 Channel still, so it’s STILL overextended vs. the prior trend, which raises the risk should you be adding at this point.  The trend is still Bullish, however, and UP for the large caps.

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

“Intel-igent Market Timing Signal”:  Strongly Negative. It has bounced without any real conviction to just above the 200 day moving average.  Great company now without a permanent CEO and facing global deceleration as a multinational.(Reminder: INTC is our “tell” on 2nd half earnings in tech as noted HERE.

Bank of America (BAC) Market Timing Signal:  Remains positive, and the stock has broken out above the down trend line on the daily chart as mentioned last week. Don’t bet on it keeping up with SPY though, as rates are coming back down, AND the economy is slated to slow in Q4 and further into Q1 and Q2 of 2019.

SP500 Earnings Season is still coming in very well with 81% of the SPX reporting to date. Review the details at this FactSet PDF: HERE.

Earnings Scorecard from the above FactSet PDF:

What were the SPX sectors with earnings surprises above expectations in Q2?  Telecom, Health Care, Tech, and Consumer Staples all had over 90% positive surprises.

What we really want to focus on is the FUTURE, not the past:

Earnings expectations fell from THESE numbers 2 weeks ago:

For Q3 2018, analysts are projecting earnings growth of 21.6% and revenue growth of 7.5%.
For Q4 2018, analysts are projecting earnings growth of 18.0% and revenue growth of 5.7%.
For Q1 2019, analysts are projecting earnings growth of 7.1% and revenue growth of 5.5%.
For Q2 2019, analysts are projecting earnings growth of 10.4% and revenue growth of 4.7%.

…to these updated numbers as of Friday per FactSet. Note the slowing beginning in Q4 and deepening into Q1 and Q2 of 2019. Q1 of 2019 is a bit stronger, while Q2 is weaker:

For Q3 2018, analysts are projecting earnings growth of 20.7% and revenue growth of 7.7%.
For Q4 2018, analysts are projecting earnings growth of 17.8% and revenue growth of 6.0%.
For Q1 2019, analysts are projecting earnings growth of 7.3% and revenue growth of 6.2%.
For Q2 2019, analysts are projecting earnings growth of 8.2% and revenue growth of 4.6%.

Lower E, means lower P, so the markets will have a reason to moderate their pace and likely correct between now and Q1 and Q2 of 2019.  The revenue GROWTH RATE decline between Q3 2018 and Q2 2019 is projected to be 42% from the numbers above!  That is big. 

Earnings growth for the SP500 is 24% (year over year comparison for the 2nd Quarter) as of the last look by FactSet, which means that even by Q4, the earnings GROWTH RATE will be down by 25.8%!  This comparison, because it’s still within the same tax year, avoids the impact of losing the tax benefits for 2018 vs. 2017 in earnings.  The coming weakness in both revenues and earnings growth rates may be why the even more economically sensitive small caps are already weakening as they have since their all time high vs. the large caps on 6-20-2018.

Finally, note another measure of risk built into the market currently.  See the labeled up trend lines 1 (green), 2 (yellow), and 3 (green), each one steeper than the prior?  Line 1 lines up with the Feb. low by the way (off the chart to the left).  This means the market is accelerating its upswing and after acceleration comes…?  Deceleration with reversion to the prior trend.

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-2018-08-03-close

Large caps still extending though in up trend.

Survey Says!  Sentiment of individual investors (AAII.com) showed a Bull minus Bear percentage spread of -2.97 vs. +4.62% last week.  Investors got a bit more Bearish as the large caps ROSE!  This alone is Bullish for further gains in the SP500 Index.

AAII.Com Individual Investor Sentiment Poll
Bulls Neutrals Bears
29.11% 38.81% 32.08%
Thurs. 12 am CT close to poll

2.  U.S. Small Caps Market Timing (IWM): Small caps have been under-performing the SP500 Index, since their all time high on 6-20-2018.  Yet, they are in the middle of a triangle.  Follow the bouncing ball either way out of the triangle.  Note they are just barely above the 50 day moving average of 166.38, closing at 166.39.   On the positive side, they remain in their current up channel.  My sense was that the negatives outweighed the positives and exited just below the Friday close on 7-16-18.

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

iwm-russell-2000-market-timing-chart-2018-08-03-close

Harbinger of economic weakness to come?

3. Gold Market Timing (GLD):  The problem for gold is that it is hurt by the strong dollar.  As rates decline, this may pressure the dollar enough vs. international flight to the dollar during the global economic deceleration (already happening in China and Europe, and Japan is slated to slow in Q3).

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

gld-gold-etf-market-timing-chart-2018-08-03-close

Gold is now back testing just above the 2017 lows.

4. Interest Rate Market Timing – U.S. 10 Year Treasury Note Yield (TNX): We now have a break of the recent up trend in rates (yellow line) and a double lower top at about 3%.  I bought intermediate term Treasuries on 7-31-2018 (ETF I used was IEF).  If you want more gain/more risk, go longer than that (e.g. TLT). 

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

tnx-10-year-treasury-note-market-timing-chart-2018-08-03-close

Have rates peaked once 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 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.  Changed this signal, which is based on small cap performance, from Red to neutral because of the higher low just put in by the small caps (IWM) forming the triangle seen in the chart above.  The small caps are a better indicator of the health of the economy, as they are most vulnerable to economic changes.  The VIX closed Friday at 11.64 is Bullish.   There is room for the VIX to fall to the sub-10 level.  Any move back above 13.31 may indicate a developing Bearish trend.  A “test” doesn’t count.  

Gold Signal  GREEN for a further U.S. stock market rally with a BEARISH Gold Trend.  There is an opportunity for at least a short term rally as noted above.

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.  Close Friday was 2.953% only slightly below last Fri.’s close.  

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.

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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 7-27-2018 Close: SP500 Index Has Room to Fall. Gold Playing Dead. Rates Rise but Still in a Range.

A Market Timing Report based on the 07-27-2018 Close, published Sunday, July 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):

The U.S. small and mid caps peaked and fell off their respective market timing peaks, both closing below their respective 50 day moving averages on a negative day following very strong GDP results (still falling short of the GDP Q/Q SAAR peak of 2014, which was above 5%; the GDP charts are on my social media feed from Friday – see links below).

The large cap SP500 Index is in danger of breaking down through the prior breakout level of 280.41, which was the March high.  If it breaks through there, and the other two indexes keep moving down, that will define a temporary top.  You can see in the chart below that the SP500 is just above the 2017 Channel still, so it’s overextended vs. the prior trend with room to fall.  Ideally for the Bulls the lower end of the 2017 Channel (orange lines) will hold the fall, but the problem is that is too far! 

The 200 day moving average of the S&P500 has been the market’s guide from the Feb. low; whether you believe in the importance of moving averages (mav for short) or not does not matter.  They are simply guides of how much a market has moved off a high in this case, but are also psychological guides at times, which is obviously what the 200 day moving average has been since February.  The SPX touched the 200 day mav once, penetrated it and bounced twice and got close to it without quite reaching it the 4th time.  We will have to check in on the market’s behavior if and when we get there.  Remember that none of these lines matters when considered outside the context of the trading at the time the given line is reached.  This process is not a once a week job!

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

“Intel-igent Market Timing Signal”:  Strongly Negative.  Intel broke important support on increasing volume, so there is no question, things are looking bleak for the stock.  Of course, the pundits immediately say it’s all company specific, but I’d be careful and look deeper.  Global growth is slowing again and that does not bode well for chip sales of any kind, product development issues and missing CEO aside.  (Reminder:INTC is our “tell” on 2nd half earnings in tech as noted HERE.

Bank of America (BAC) Market Timing Signal:  Remains positive, and the stock has broken out above the down trend line on the daily chart.  The stock closed at 31.06 on Friday.  XLF has done the same, so investors are buying into the rally in the 10 Year Treasury, which in my view is non-sustainable, at least for very long.  There may be a few more months of rising inflation that can goose it, but then global deceleration should drag it back down.  A close above the prior high would negate this view. I predicted this temporary burst of inflation due to the Trump sugar infusion of tax cuts would cause rates to rise somewhat and financials to rally. 

SP500 Earnings Season is still coming in very well with about half of the SPX reporting to date. Review the details at this FactSet PDF: HERE.

Earnings Scorecard from the above FactSet PDF: “For Q2 2018 (with 53% of the companies in the S&P 500 reporting actual results for the quarter), 83% of S&P 500 companies have reported a positive EPS surprise and 77% have reported a positive sales surprise. If 83% is the final number, it will mark the highest percentage since FactSet began tracking this metric in Q3 2008.”

The strongest 3 sectors in earnings surprises were: Consumer Discretionary (XLY) (consumption is still strong) and Utilities (XLU) running close together and then Healthcare (XLV) closely followed by Industrials (XLI) and Telecom (XLT).  Revenue surprises were modest, 1.9% at the high end in Technology (XLK) followed by Financials (XLF), Industrials (XLI), and Real Estate (XLRE).

The issue is still with the next few quarters, especially Q4 of 2018 and Q1 of 2019, which could be significantly weaker than the current numbers as I discussed last week HERE.

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-2018-07-27-close

Reversal coming soon?

Survey Says!  Sentiment of individual investors (AAII.com) showed a Bull minus Bear percentage spread of +4.62% from +9.72% last week.  Once again, there is plenty of room to become more Bullish or Bearish.  Not much help. One catch remains… The Neutral Rate by itself is predictive of higher stock prices out 6 months with a probability of about 80% per AAII research on their own data. 

AAII.Com Individual Investor Sentiment Poll
Bulls Neutrals Bears
31.52% 41.58% 26.90%
Thurs. 12 am CT close to poll

2.  U.S. Small Caps Market Timing (IWM): Small caps are leading the way down off their recent top.

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

iwm-russell-2000-market-timing-chart-2018-07-27-close

Weakness set in on about July 10th vs. the large caps.

3. Gold Market Timing (GLD):  Gold is fairly flat vs. the recent low.  Rates and the dollar dropping is what gold needs to revive.  The only positive I see is that the last volume spike did NOT create a new low as the prior spikes did. 

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

gld-gold-etf-market-timing-chart-2018-07-27-close

Flat near the recent low.

4. Interest Rate Market Timing – U.S. 10 Year Treasury Note Yield (TNX): You see on the chart below that we have the potential of a lower high here.  If the rise of inflation persists for a few more months, rates will move even higher, but are not likely to top the prior high.  If you are betting on this move in rates by buying financials, be prepared to exit when global deceleration infects the U.S economy going into Q4 2018 or Q1 2019 or on falling interest rates. 

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

tnx-10-year-treasury-note-market-timing-chart-2018-07-27-close

Rates making another lower high or will inflation persist longer?

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 RED for a further U.S. stock market rally with a Bullish SP500 Index trend.  RED because the IWM trend is down, as I originated this signal with small caps.  I’m being a little aggressive with this call, but we’re off a prior top and down from a lower high.  The small caps are a better indicator of the health of the economy, as they are most vulnerable to economic changes.  The VIX closed Friday at 13.03 barely higher than the 12.86 close last Friday, but below the key 13.31 number I have pointed out.   There is room for the VIX to fall to the sub-10 level.  We should have a “decision” in the SP500 Index this week as to which way it will pivot.  I was correct so far to sell small caps, but let’s see what the large caps do now. 

Gold Signal  GREEN for a further U.S. stock market rally with a BEARISH Gold Trend.  There is an opportunity for at least a short term rally as noted above.

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

Rate Signal YELLOW for a further stock market rally with a NEUTRAL 10 Year Yield Trend.  Close Friday was 2.960%.  

As said before (note top trigger changed to 3.035%): “A more definitive rise above 3.035% would turn the rate trend back to Bullish (bearish for bonds).  A fall below 2.717% would be required to turn the rate trend back to Bearish. “Bullish” for yields is Bearish for bonds and vice versa.  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

Market Timing Brief™ for the 7-20-2018 Close: SP500 Index Stuck After Earnings. Time to Pivot! Gold Glimmers? Rates Rise for a Trade in Financials.

A Market Timing Report based on the 07-20-2018 Close, published Sunday, July 22nd, 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): Let’s check in on two signals we’ve been following:

“Intel-igent Market Timing Signal”:  Negative.  It’s forming a lower high in fact.  As said, Intel’s price must move back up and close above 54.36 to negate the sell signal.   INTC is our “tell” on 2nd half earnings in tech as noted HERE.  Earnings will be out for Intel on Thursday, July 26th per NASDAQ.

Bank of America (BAC) Market Timing Signal:  Positive, although it is too early to know if it’s sustainable.  The stock closed at 30.13 on Friday above the Feb. low.  For now, this is a positive reversal.  The XLF is about at its down trend line and must move higher to create a buy signal.  This may just be a rally that will last a quarter or two, as interest rates should push down to the lower end of their range while the global economy decelerates and drags the U.S. down with it as we enter Q4 2018 to Q1 2019.  You will note below that the immediate rate trend is UP, which could create this rally for the financials, however short it is.

SP500 Earnings Season is coming in very well with about 17% of the SPX reporting to date. 

Last week I said: “The SP500 Index at Friday’s close stopped JUST BELOW the March high of 2801.90 at 2801.31.  We have a re-topping at a prior higher low.”  This week the close was at 2801.83 it is less than a point higher than it was last Friday!  Since earnings really began in earnest with bank earnings on Friday the 13th, the market has gone nowhere based on the very positive results cited by FactSet:

“Earnings Scorecard: For Q2 2018 (with 17% of the companies in the S&P 500 reporting actual results for the quarter), 87% of S&P 500 companies have reported a positive EPS surprise and 77% have reported a positive sales surprise.”  See the actual earnings and revenue growth at the PDF link below.

What we’re more interested in are the forward projections:

FactSet says (from PDF link HERE):

For Q3 2018, analysts are projecting earnings growth of 21.6% and revenue growth of 7.5%.
For Q4 2018, analysts are projecting earnings growth of 18.0% and revenue growth of 5.7%.
For Q1 2019, analysts are projecting earnings growth of 7.1% and revenue growth of 5.5%.
For Q2 2019, analysts are projecting earnings growth of 10.4% and revenue growth of 4.7%.

Note that Q3 2018, which ends Sept. 30th and will be reported in October, at the moment represents a slight acceleration of earnings from current levels based on reports to date (read the PDF at link above), but earnings and revenues are projected to materially slow as we enter Q4 2018 and Q1 2019.

When the market will begin discounting this in a big way is an unknown as is the extent of the draw-down, but the lower growth projections, as I’ve been saying for weeks, must naturally lead to some adjustment of stock prices to the downside.  We are talking about a drop of more than HALF in the prior earnings growth rate.

The general assumption is that markets run 6 months ahead of the data going south.  Q4 2018 earnings are reported in January 2019 6 months from now, so by that rule, the market should decline starting…now. 

Remember too that the boost in earnings we are seeing is based on “Fiscal” maneuvers meaning the Trump/GOP corporate and individual tax cuts and repatriation of foreign cash holdings of corporations.  Those don’t add to GROWTH of earnings going forward unless the money is used to increase revenues and earnings!  Stock buybacks and dividends don’t do that. They provide a one time boost to earnings, which per FactSet has helped to offset increased costs due to inflation.

An unanswered research question is this “How much of the tax cut money will be successfully invested in new growth and how much will just go into shareholder pockets, employee pockets (many of whom are deserving of long awaited wage increases), and foolish expansion decisions/buyouts of competitors etc.?

Time has commented HERE on this issue claiming a combined 56% is going to workers (13%) and investors (43%) based on a Morgan Stanley survey, so the rest could presumably just be kept aside OR used to increase investments in the United States.  The tax law, however, does not tell companies they must invest the funds in the U.S.

America First?  Not necessarily given the poorly written tax law that should have said, for example, that repatriated funds MUST be invested within the United States!

Realize there is a time lag in the investment of the tax cut bump in earnings.  What if it takes 12 months for most companies to deploy the cash in new and profitable ventures?  That means the earnings growth FROM the boost in earnings in the 2018 quarters could filter through to provide growth into 2019 to offset some of the global deceleration.

In the meantime, the SP500 Index closed just below a major LOWER high, while BOTH mid caps (IJH) and small caps (IWM) closed just below all time highs. 

For IJH, it is the prior end of Jan. high and for IWM the more recent and higher June and July highs that are the big test.

On a practical level, due to this teetering of all 3 indexes at major highs, I decreased my equity exposure as a percentage of my maximum Bullish exposure by 5% or so this past week by selling small caps (that means if your allocation is 60%, you would lower it by 3%).  Overall I’m at about 86% of usual maximum equity exposure worldwide, highly concentrated in the leader – the U.S.

I may have been early on that move to raise cash, but I’m willing to add back more equity exposure if I am wrong, and the pivot is UP rather than down from here.  The percent exposure I have tells you this is a tactical trading move, not one that says “the market is going into a protracted Bear Market.”  If that’s what shows up, you’ll see my exposure drop much more dramatically.

Still, the next move could be down 10% or more (a “Mini Bear”) without turning the market into a Big Bear as I’ve defined it HERE.  

Keep up-to-date during the week at Twitter and StockTwits (links below), where a combined 33,573 people are joining in…

Follow Me on Twitter®  Follow Me on StockTwits®.

SP500 Large Cap Index (click chart to enlarge; SPX, SPY):  Stopped AGAIN JUST below the March high of 2801.90.  Note also that the price is close to the 2017 (orange lines) channel high. 

sp500-index-spx-market-timing-chart-2018-07-20-close

Pivot time! Follow the move, up or down.

Survey Says!  Sentiment of individual investors (AAII.com) showed a Bull minus Bear percentage spread of +9.72% vs. +13.90% last week.  Once again, there is plenty of room to become more Bullish or Bearish.  Not much help in my view.  One catch… The Neutral Rate by itself is predictive of higher stock prices out 6 months with a probability of about 80% per AAII research on their own data.  This is a reason NOT to get overly Bearish.  This is just ONE factor I consider of course, and the ultimate arbiter is THE MARKET! 

AAII.Com Individual Investor Sentiment Poll
Bulls Neutrals Bears
34.66% 40.40% 24.94%
Thurs. 12 am CT close to poll

2.  U.S. Small Caps Market Timing (IWM): Small caps are still under-performing large caps by a bit, which they should not in a raging Bull market.  But they are still mid-channel (magenta lines), so there is no major directional change to be seen quite yet.  More of a caution sign.

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

iwm-russell-2000-market-timing-chart-2018-07-20-close

Small caps still holding mid-channel.

3. Gold Market Timing (GLD):  Gold finally did something slightly positive this past week.   The volume shot up again, but a new low was not achieved based on that volume.  The next test is to create a reversal above the Dec. low shown in the chart below…

The reversal may in fact happen.  As the market begins to see how the Fed will have to go into neutral at best in the coming months, unless inflation persistently rises, the U.S dollar will fall with interest rates, and gold will rise.

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

gld-gold-etf-market-timing-chart-2018-07-20-close

Gold must reverse above that Dec. 2017 low.

4. Interest Rate Market Timing – U.S. 10 Year Treasury Note Yield (TNX): The immediate rate trend is now UP.  The intermediate trend as summarized in the “Signal” list below, is neutral.  Inflation is set to peak sometime this quarter, so rates could rise for a bit and then resume their decline.  That means financials are a trade, not a hold! 

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

tnx-10-year-treasury-note-market-timing-chart-2018-07-20-close

Immediate trend is UP, but intermediate trend is neutral.

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.  GREEN because the IWM up trend is still intact, as I originated this signal with small caps.  The small caps are a better indicator of the health of the economy, as they are most vulnerable to economic changes.  The VIX closed Friday at 12.86 higher than the 12.18 close last Friday, but below the key 13.31 number I have pointed out.   There is room for the VIX to fall to the sub-10 level, but earnings growth projections will allow that or NOT.

Gold Signal  GREEN for a further U.S. stock market rally with a BEARISH Gold Trend.  There is an opportunity for at least a short term rally as noted above.

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

Rate Signal YELLOW for a further stock market rally with a NEUTRAL 10 Year Yield Trend.  The immediate trend is UP however as noted above.  Close Friday was 2.895%.  

As said before (note top trigger changed to 3.035%): “A more definitive rise above 3.035% would turn the rate trend back to Bullish (bearish for bonds).  A fall below 2.717% would be required to turn the rate trend back to Bearish. “Bullish” for yields is Bearish for bonds and vice versa.  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

Market Timing Brief™ for the 7-13-2018 Close: Earnings Will Rule the Market Over the Next Several Weeks. Gold On Prior Lows. Rates Steady in the Range.

A Market Timing Report based on the 07-13-2018 Close, published Sunday, July 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): Let’s check in on two signals we’ve been following:

“Intel-igent Market Timing Signal”:  Negative.  As said, Intel’s price must move back up and close above 54.36 to negate the sell signal.   INTC is our “tell” on 2nd half earnings in tech as noted HERE.  Earnings will be out for Intel on July 26th per NASDAQ.  You should check the earnings dates for all your individual stock holdings by typing “INTC earnings,” or whatever the symbol, into Google.  Recheck the date a week before earnings to be sure they have not changed it.

Be prepared to exit stocks that project weak earnings going forward, unless you still consider them great long term investments despite hick-ups.  Realize though even Berkshire Hathaway’s stock has had multiple 50% pullbacks during Warren Buffett’s tenure.  The last pullback like that was from late 2007 to 2009.  BRKA and BRKB are just above their Feb. lows as financials have been week.  Speaking of which…

Bank of America (BAC) Market Timing Signal:  Negative.  The stock briefly tested above the Feb. low of 29.13 and then failed.  It closed at 28.55 on Friday.  The inability of bank stocks to rally off of massive dividend and share buybacks is striking and a warning sign about where U.S. interest rates are headed.  (see below for more discussion)

The SP500 Index at Friday’s close stopped JUST BELOW the March high of 2801.90 at 2801.31.  We have a re-topping at a prior higher low.  Turning down from here in a significant way would be negative, but we’ll have to see where earnings take us.  Forward guidance into the second half of the year when we can expect Ex-U.S. global slowing to catch up with U.S. multinationals will be the key to achieving gains vs. losses over the next few months.

Keep up-to-date during the week at Twitter and StockTwits (links below), where a combined 33,560 people are joining in…

Follow Me on Twitter®  Follow Me on StockTwits®.

SP500 Large Cap Index (click chart to enlarge; SPX, SPY):  Stopped JUST below the March high of 2801.90. 

sp500-index-spx-market-timing-chart-2018-07-13-close

SP500 edges up toward top of the 2017 channel range.

Survey Says!  Sentiment of individual investors (AAII.com) showed a Bull minus Bear percentage spread of +13.90% vs. -11.42% last week.  This changes little as it’s not at an extreme.  There is plenty of room to become more Bullish or Bearish. 

AAII.Com Individual Investor Sentiment Poll
Bulls Neutrals Bears
43.05% 27.80% 29.15%
Thurs. 12 am CT close to poll

2.  U.S. Small Caps Market Timing (IWM): U.S. Small caps are leading large since the May 29th low, whereas mid caps are just barely ahead of large; however, since the June 27th low, large caps lead mid caps, which barely lead small caps. We will have to closely watch for further deterioration of small cap leadership.  Small caps need to resume their gains soon. They are still mid-channel (magenta lines), so there is no major directional change to be seen quite yet.

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

iwm-russell-2000-market-timing-chart-2018-07-13-close

Small cap lead has been dissipating since the end of June.

3. Gold Market Timing (GLD):  My comments from LAST WEEK should suffice here.  Gold is back down testing a major low. 

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

gld-gold-etf-market-timing-chart-2018-07-13-close

Gold back down testing a big low.

4. Interest Rate Market Timing – U.S. 10 Year Treasury Note Yield (TNX): Stuck in neutral but susceptible to being thrashed around within the range based on inflation numbers, which are slated to heat up a bit more this summer before declining once again.  See my prior comments under Section#4 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-2018-07-13-close

Rates stay in range. May react with upswing on inflation data over the next few months.

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.  GREEN because the IWM up trend is still intact, as I originated this signal with small caps.  The small caps are a better indicator of the health of the economy, as they are most vulnerable to economic changes.  The VIX closed Friday at 12.18, below the key 13.31 number I have pointed out.   There is room for the VIX to fall to the sub-10 level, but earnings growth projections will allow that or NOT.

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 YELLOW for a further stock market rally with a NEUTRAL 10 Year Yield Trend.  Close Friday was 2.831%.  Things have changed due to the recent swoon and then bounce in rates.  A more definitive rise above 3.036% would turn the rate trend back to Bullish (bearish for bonds).  A fall below 2.717% would be required to turn the rate trend back to Bearish. “Bullish” for yields is Bearish for bonds and vice versa.  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

Market Timing Brief™ for the 7-06-2018 Close: Summer Dip Over for Stocks? Small Caps Lead. What Gold Needs as Rates Consolidate.

A Market Timing Report based on the 07-06-2018 Close, published Saturday, July 7th, 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): Let’s check in on two signals we’ve been following:

“Intel-igent Signal”:  Negative.  The current move looks like a bounce in a downtrend.  Intel’s price must move back above 54.36 to negate the sell signal.  The inflection point is 54.36, and the close Friday was 51.37.  INTC is our “tell” on 2nd half earnings in tech as noted HERE.  Earnings start on July 10th as mentioned last week with several big banks reporting on July 13th.

Bank of America (BAC) Signal:  Negative.  Even dead animals bounce, so they say, but BAC did not bounce, even after the Fed cleared them for big dividend payments and buybacks.  The BAC low in Feb. was 29.13 and the close Friday was 28.03, just below the close of last Friday of 28.19. The failure of a rally after the announcement higher dividends and buybacks would be allowed at the big banks by the Federal Reserve makes it even more negative.  This poor behavior of financials, as I’ve said, indicates a poor prognosis for the economic recovery in the U.S. as slowly rising rates are expected, not the falling rates we’ve seen of late.  Even if inflation ticks up a bit more, it could be transient, as the rest of the world slows with only a few exceptions worldwide. 

Last week I outlined two possible outcomes in the near term.

First Option: We descend in an A (down) – B (consolidation) – C (down) fashion with C ending at worst at the orange line in the chart below that represents the base of the 2017 channel. Other choices include the 200 day moving average or the May 29 low.   I would prefer to see the May 29th low hold.  I also said: “The trend will remain intact as long as the orange up trend line is held or if 2594.62 holds, which is the May 3rd low.”

Second Option: This option has prevailed for now, the No C Wave Option (Down Wave – Consolidation – Up Wave): The 2698.67 initial low of the current consolidation, which was tested twice with slight breaches, could be challenged again, but no more.  2691.99 would have to hold at worst.”  2698.55 was the re-challenge low reached on July 2nd.  And then the SP500 Index bounced on cue. 

I added small cap exposure near the first recent low, which has worked out well thus far.  You have to “buy fear” if you want to beat the market, and unfortunately, after your first buy, you sometimes are forced to “buy fear” at even lower levels!

Despite the Trump Trade War risk, the market chose to ignore it as what I’ve called “sloppy public trade negotiation” that will pass, though it could take a while and provide further buying opportunities.

What I’m concerned about is the infection of the U.S. economy by foreign economic illness (deceleration of growth), which would only be worsened by a real trade war.  Remember: Lower growth means lower profit growth, which in turn means lower stock prices based on the falling return generated by stocks. 

I have cash available, but may choose to raise more or at least rotate more exposure out of the SP500 Index and into higher yield (REITs as mentioned on social media are leading since the May 3rd low (VNQ)) and defensive positions like healthcare and bonds.  I share my exposure level changes, when they are significant, on social media (links below).

The SP500 Index trend now?  I consider it Bullish again, as we’ve just seen a higher low, and the price is moving up above the middle of the 2017 channel (orange lines on the chart below…).

This move must keep going obviously, or there will be a reversal at a right shoulder of a head and shoulders formation, which could return us back to the prior lows.  Right – not good!  Please stay tuned at the social media links below, because summers are long, and dip opportunities may abound in the midst of Presidential tweets!  Love him or not, he and his administration move the markets. 

Keep up-to-date during the week at Twitter and StockTwits (links below), where a combined 33,568 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-2018-07-06-close

Moving up in the upward channel. That’s called an UP trend!

Survey Says!  Sentiment of individual investors (AAII.com) showed a Bull minus Bear percentage spread of -11.42% vs. -12.25 the prior week.  It barely budged.  No change from my view last week, which you can see by scrolling down to it HERE.

AAII.Com Individual Investor Sentiment Poll
Bulls Neutrals Bears
27.86% 32.87% 39.28%
Thurs. 12 am CT close to poll

2.  U.S. Small Caps Market Timing (IWM): U.S. Small caps continue to lead large caps.  Mid caps are doing better than large caps, but small caps take the prize.  Note the similar location within the upward channel vs. the large caps.  The out-performance could continue with the tariff battles and the strong U.S. dollar.  The latter should become more pronounced as assets are relocated to the U.S. from weaker economies around the world.

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

iwm-russell-2000-market-timing-chart-2018-07-06-close

Small cap trend still strong and intact.

3. Gold Market Timing (GLD):  Gold should rally once the Federal Reserve reverses course and becomes marginally more dovish, OR if panic ensues abroad as emerging markets collapse further.  Panic can drive gold and the U.S. dollar up at the same time. 

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

gld-gold-etf-market-timing-chart-2018-07-06-close

Gold won’t turn in a meaningful way until rates fall harder after inflation peaks and falls OR unless panic breaks out abroad.

4. Interest Rate Market Timing – U.S. 10 Year Treasury Note Yield (TNX): It may be safe to hold bonds for a while, although a bit more rate upside risk (within the yield down trend) remains, as inflation peaks in the coming months.  Accumulating REITs has worked, and in fact TLT just broke out to a new recent high on Friday.  Follow the trend.  Although I am calling the overall 10 Year rate trend “Neutral,” the immediate trend is down, off a lower high.  (see further comment on rates below…)

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

tnx-10-year-treasury-note-market-timing-chart-2018-07-06-close

the 10 year yield is neutral overall, but currently in decline.

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.  GREEN because the IWM up trend is still intact, as I originated this signal with small caps.  The small caps are a better indicator of the health of the economy, as they are most vulnerable to economic changes.  The VIX closed Friday at 13.37, flirting with the key 13.31 number I have pointed out.   The Bulls must quickly take out the 13.31 target to succeed from here.

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 YELLOW for a further stock market rally with a NEUTRAL 10 Year Yield Trend.  Things have changed due to the recent swoon and then bounce in rates.  A more definitive rise above 3.036% would turn the rate trend back to Bullish (bearish for bonds).  A fall below 2.717% would be required to turn the rate trend back to Bearish. “Bullish” for yields is Bearish for bonds and vice versa.  This level of the 10 Year Treasury Yield, which is too high for current conditions as explained HERE, will 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

Market Timing Brief™ for the 6-29-2018 Close: Bigger Summer Dip Ahead? Both Large and Small Caps Fall to Mid-Channel. Gold Slump Continues As U.S. Dollar Rises. Rates Ease.

A Market Timing Report based on the 06-29-2018 Close, published Sunday, July 1st, 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): Let’s check in on two signals we’ve been following:

“Intel-igent Signal”:  Negative.  The inflection point is 54.36, and the close Friday was 49.71, 8.56% off that point.  INTC is our “tell” on second half earnings in tech.  They had warned on possible weakness in the second half as noted HERE.  Earnings start on July 10th as mentioned last week with several big banks reporting on July 13th.

Bank of America (BAC) signal:  More Negative than last week.  The BAC low in Feb. was 29.13 and the close Friday was 28.19, 3.33% below that low. The failure of a rally after the announcement higher dividends and buybacks would be allowed at the big banks by the Federal Reserve makes it even more negative.  The fact that financials are not coming along for the recovery, means the recovery’s momentum is in doubt.  Lack of economic momentum means lack of earnings growth momentum,which leads to failing stock market momentum.  

Two weeks ago I pointed out: “The SP500 Index is hugging the upper trend line of the 2017 channel.  This is not a problem, but it allows for a pullback within the trend without ending it.”  I also said it was a “place you could ‘Take some off’ if you are overinvested in stocks.” Yes, that was right.

This was my conclusion last week: “The loss of key breakouts noted as well as negative INTC and BAC signals, as well as a breach of that yellow up trend line shown in the SP500 Index chart below indicates something more than a couple day dip is in store for the market.  (see chart in last week’s post; link to upper right).”  The dip started right at the open on Monday. 

If the general up trend is to survive. there are two possible outcomes in the near term.

  1. We descend in an A (down) – B (consolidation) – C (down) fashion with C ending at worst at the orange line in the chart below that represents the base of the 2017 channel. Other choices include the 200 day moving average or the May 29 low.   I would prefer to see the May 29th low hold as if it does not, there will be a lower low, which could signal to many investors that the prior down trend has resumed.  The last high achieved on 6-13-18 intraday was a lower high vs. the Feb. and March highs.  No one will argue with this: “A downtrend is established by a series of lower lows and lower highs.”
    1. The caveat I’ll share here is the May 29th low was not truly a legitimate low in the trend, as it consisted of a one day test below the prior consolidation support.
    2. Conclusion: The trend will remain intact as long as the orange up trend line is held or if 2594.62 holds, which is the May 3rd low.
  2. The No C Wave Option: The 2698.67 initial low of the current consolidation, which was tested twice with slight breaches, is challenged again, but no more.  2691.99 would have to hold at worst.

Both of those scenarios are possible.  The bigger sell-off is a risk particularly given the messy nature of Trump’s public trade negotiation with “shots fired” on our trading partners.

I have cash to take advantage of any further dip as delineated on my social media feeds (links below)…

We are heading into a mid-week holiday with normally positive seasonality and the U.S. Jobs number coming out on Friday should say things are still going well in the U.S.  That will help the dollar and particularly U.S. Small Caps.  Remember, the Fed is no longer focused on jobs; it is focused on inflation and financial stability.

The SP500 Index trend now?  I consider it “Neutral,” due to the lower highs and higher lows.  Within that neutral trend, the 2017 up trend is still intact.  It will break though, if “global deceleration” infects the U.S.  

Keep up-to-date during the week at Twitter and StockTwits (links below), where a combined 33, 557 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-2018-06-29-close

Just a quick “Summer Dip” or more?

Survey Says!  Sentiment of individual investors (AAII.com) showed a Bull minus Bear percentage spread of -12.25 vs. +12.54% the prior week.  There is still room for more downside, despite the drop this week.  The recruitment of 14.62% more Bears this week says that Bears are being converted on this swoon and more could join them.  Realize both sentiment, and the markets could turn very quickly on any Trump chatter about trade solutions.  In conclusion: This level of sentiment spread is not that useful.  I’ll tell you when it is…

AAII.Com Individual Investor Sentiment Poll
Bulls Neutrals Bears
28.45% 30.75% 40.80%
Thurs. 12 am CT close to poll

2.  U.S. Small Caps Market Timing (IWM): Small caps are also mid-channel, but off a new all time high.  The dollar is still trending up.  UUP made a new high this week and pulled back just a bit.  This could continue as the rest of the world prints softer economic numbers, and the U.S. prints decent growth numbers for both GDP and company earnings.  Money flow to where growth is in the world.

Dollar strength means small caps could continue to be favored still over large caps.  Unfortunately, both small and large caps are in decline of late.  Be sure you are not holding companies with falling earnings expectations, as they will tank the fastest. 

Although small caps remain stronger than large caps, given the breakout to a new all time high, optimally, that breakout must be maintained. 

The increase of volume on the recent drop is a negative (see green volume arrow below).  As stated, small caps are mid-channel, so the base of the channel can come into play with survival of the up trend in small caps.  (lower magenta line). 

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

iwm-russell-2000-market-timing-chart-2018-06-29-close

Must maintain the prior breakout.

3. Gold Market Timing (GLD):  Falling rates say the Fed’s course in raising short rates is wrong, but gold declined some more this week.  The bigger turn will come when the Federal Reserve is forced to reverse their hawkish stance and move to neutral initially, then potentially back to dovish again if the global picture drives them there.  If things get bad enough prior to the September meeting, they won’t hike, and gold will already be rising.

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

gld-gold-etf-market-timing-chart-2018-06-29-close

Gold slump continues. Waiting for a Fed reversal.

4. Interest Rate Market Timing – U.S. 10 Year Treasury Note Yield (TNX):  The 10 Year Yield is being buffeted by both inflation worries due to higher employment in the U.S. (a late cycle issue) and global deceleration.   The yield is now at the lower end of the recent range of 2.717% to 3.115%.  All this says bonds won’t do as badly as the pundits had predicted they would, at least for now.

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

tnx-10-year-treasury-note-market-timing-chart-2018-06-29-close

Rates in the lower end of their recent 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 NEUTRAL SP500 Index trend.  GREEN because the IWM up trend is still intact, and I originated this signal with the small not large caps.  The VIX closed at a “Bears Mean Business level” of 16.09, above the key 13.31 number I have pointed out.   That’s why I expect another test is coming per the above delineated scenarios.

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 YELLOW for a further stock market rally with a NEUTRAL 10 Year Yield Trend.  Things have changed due to the recent swoon and then bounce in rates.  A more definitive rise above 3.036% would turn the rate trend back to Bullish (bearish for bonds).  A fall below 2.717% would be required to turn the rate trend back to Bearish. “Bullish” for yields is Bearish for bonds and vice versa.  This level of the 10 Year Treasury Yield, which is too high for current conditions as explained HERE, will 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 , , , , , , , , , , , , | 2 Comments

Market Timing Brief™ for the 6-22-2018 Close: Summer Market Dip Starting? Get Your Buy List Ready. Gold Down Another Notch with Rates Mid-Range.

A Market Timing Report based on the 06-22-2018 Close, published Sunday, June 24th, 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): Let’s check in on two signals we’ve been following:

“Intel-igent Signal”:  Negative.  The trigger point is 54.36 and the close Friday was 52.50, despite INTC guiding earnings for the current quarter upward.   There was also the small thing of the CEO being forced out for fraternizing with an employee in the age of #MeToo ethical standards.  It was also an Intel rule, and he violated it, so he’s out.  This may taint this “tell” on the market a bit, as the CEO had been doing good things in redirecting the companies efforts more away from the PC toward data centers or as it is better marketed to stockholders – “the Cloud”!   The CFO supposedly knows what the company needs in the meantime as they search for the next CEO.

Remember that INTC was supposed to be our “tell” on what the second half of the year in tech could look like in terms of earnings.  They had warned on possible weakness in the second half as noted HERE.  Despite the CEO issue, I believe the market will look past it to the company’s performance, although there could be some degree of damage.  The Q2 earnings season starts with Pepsi (PEP) on July 10th followed by JPM, C, WFC, and PNC banks on Friday July 13th.

Bank of America (BAC) signal: Negative.  The BAC low in Feb. was 29.13 and the close Friday was 28.99 with small caps and the QQQ – the latter not all tech, but heavy in tech at new all time highs, although that is barely the case for QQQ, as the Trump Trade War heats up.  The QQQ close Friday was 175.32, while the breakout was at 175.21.  XLK which is “pure tech” in the SPX is below the breakout at 71.34 with a close Fri. of 70.80.

I had said, “We’ll keep an eye on whether BAC can hold the prior recent major lows.  If not, a greater decline in interest rates would be expected.”  I believe interest rates will fall further in the U.S. as global deceleration of growth sinks in.  This will temper the gains in the U.S. perhaps, but remember that the U.S. is among the strongest economies left, so money has rotated into the U.S. from abroad.  That’s exactly what I did near the Feb. lows, and it has paid off.  The U.S. market has recovered while Europe, Japan, and China ETFs have lagged very badly.  FXI (China Big Cap) is BELOW the Feb. low.  EWJ, which is the Japan ETF is near the Feb. low, and Europe (VGK) is as well.  Studies have shown that when markets diverge, you can do better by concentrating your investment in the strongest countries rather than just going to cash. 

Last week I pointed out: “The SP500 Index is hugging the upper trend line of the 2017 channel.  This is not a problem, but it allows for a pullback within the trend without ending it.”  I also said it was a place you could “Take some off” if you are overinvested in stocks.  What happened is the market did pull back from that channel top  a bit, but it’s only down about 21.1% from the top of the channel.   It could slide further, depending on the trajectory of the tariff disputes Trump is engaged in.

The midcaps, QQQ, and XLK, all among the leaders, are back down below their prior breakout points.  Small caps are 4.47% above their breakout on the other hand.  A  breakdown there would be an extremely negative sign for the market, because the thesis there has been that the U.S. economy can be very strong domestically, even if foreign predominantly large cap sales suffer from the trade disputes.  If that’s not the case, then the supposition is that the large cap suffering is going to spill over into all stocks, even the small caps.  There is no definitive break yet in the midcaps either though, despite being belong the breakout point.

The loss of key breakouts noted as well as negative INTC and BAC signals, as well as a breach of that yellow up trend line shown in the SP500 Index chart below indicates something more than a couple day dip is in store for the market.   The other softer sign of a “problem” is that some stocks like Netflix are up 34.08% since my buy on 4-24-18.  At this rate, by 4-23-19, NFLX will be at 918 for a gain of 200.6%.  Does that seem likely?  Possible perhaps in a nutty world, but not likely, so some sort of pullback is needed along that path.  If you have no cash, this may be the time to raise a bit, so you can buy stocks back lower this summer. 

One warning though: Don’t sell your winners unless it is to take some modest profits off the table, but do it on a stop loss basis for a strong stock like NFLX.  And be sure the company you buy is as good as or better than the one you sell.  If not, why are you selling?  To de-worsify?  To buy cheap companies that may take years to turn around? 

Sell your losers first to raise cash and get a list ready to redeploy the assets into strong companies with strong balance sheets and a high return on equity, one of the top criteria Warren Buffett uses to identify great companies with a consistent operating history.  Why is that?  It is because earnings mean nothing if a company does not create shareholder value from those earnings.  Buffett states that a company should be able to create at least $1 in value for every $1 of retained earnings.

Keep up-to-date during the week at Twitter and StockTwits (links below), where a combined 33, 540 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-2018-06-22-close

Just a dip or more?

Survey Says!  Sentiment of individual investors (AAII.com) showed a Bull minus Bear percentage spread of +12.54% vs. +23.08% vs. the prior week.  I said last week: “This is compatible with a continued Bull move, but allows for a dip of a few percent (say 3%) or a period of consolidation.”  We’re down only a little so far.  Sentiment in this range says there is room for both downside and upside, so it’s not that helpful.  We are not at a pivot point in sentiment terms, which is just one parameter I follow.

AAII.Com Individual Investor Sentiment Poll
Bulls Neutrals Bears
38.72% 35.10% 26.18%
Thurs. 12 am CT close to poll

2.  U.S. Small Caps Market Timing (IWM): As said above, the small cap breakout must be maintained or a big crack in the continued U.S. expansion will be exposed.  Follow these signals with me on social media (links above).

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

iwm-russell-2000-market-timing-chart-2018-06-22-close

Small caps lead still.

3. Gold Market Timing (GLD):  I believe the current gold decline is temporary, due to a miscalculation by the Federal Reserve.  They are raising rates into a global deceleration and will be forced to at least hold off from further hikes after a Sept. hike, as I discussed last week (links to past issues to upper right).  When they become less hawkish on inflation, the U.S. dollar and long rates will both be falling and gold will rise again.  It’s a bad trade for now, but the reversal is coming.

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

gld-gold-etf-market-timing-chart-2018-06-22-close

Gold is still weak and may be for weeks to months.

4. Interest Rate Market Timing – U.S. 10 Year Treasury Note Yield (TNX):  Rates are mid-range as the chart shows and could move a bit higher on inflation news and lower on global deceleration news.  Seems too hard to trade to bother, but there are always those who do.

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

tnx-10-year-treasury-note-market-timing-chart-2018-06-22-close

The 10 Year Yield is in the middle of the recent 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 VIX closed at 13.77, above the key 13.31 number I have pointed out.  The close was 11.98 last week and 12.18 the prior Friday.  A rise above 14.57 would be a concern for a more serious correction, although on Thursday the high was 15.18, so a quick test above is not enough to tip the market over. 

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 YELLOW for a further stock market rally with a NEUTRAL 10 Year Yield Trend.  Things have changed due to the recent swoon and then bounce in rates.  A more definitive rise above 3.036% would turn the rate trend back to Bullish (bearish for bonds).  A fall below 2.717% would be required to turn the rate trend back to Bearish. “Bullish” for yields is Bearish for bonds and vice versa.  This level of the 10 Year Treasury Yield, which is too high for current conditions as explained HERE, will 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 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 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 , , , , , , , , , , , , , | 2 Comments