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Let's look at where we are NOW.
Market Timing Brief for 11-23-2011: This Has Happened Before
1. The SP500 Index is tipping down in late November. It happened in 2008. I know you see the similarity between now and 2008. Then as now the financial system started to seize up. That is exactly what is happening in Europe. They are unable to get their act together, because the government was set up to be a dysfunctional one. There is no Euro government, just a Euro and some flimsy agreements between the various countries. There is no leadership in Europe, so the problems are much, much harder to solve.
2. In 2008 and even in 2007 when the big Bear first growled, the market rallied from a November market timing low despite later, greater losses.I expect a rally to begin within days and eventually, we COULD have another sell-off if Europe is not truly fixed.
3. How deep this thing goes is unknown. My personal tact is to buy higher at this point rather than lower or to look for some sort of market timing bottoming process before buying. (The "Read My Feed" page on the blue bar will show you the latest articles and whether they are on the main site or the blog. Twitter will cover the rest, when I need to get a note to you fast - you can view the Twitter feed by bookmarking my Twitter page: My Twitter Market Posts are Here.)
You will have to set some sort of stops on all your positions, because we don't really know how slow to act the Europeans will be and please read my Passive Shorting (TM) page (see blue navigation bar to upper left), so you know what I am talking about in regard to selling. You have to know how to sell AND know how to get back into the market.
4. Because I expect a rally soon, this will not likely be the best selling point. If I were to sell anything today, I'd sell slowly. Remember that being out of the market is a risk when the market is stretched to the downside, because you miss the bounces, which are often news based.
If you "like" what you've read, could you "Like" and/or retweet it below? Thanks very much. Check out my passive shorting page here if you have never read it:Profiting from Selling
Market Timing Brief for 11-02-2011: Now Which Way?
1. This market is a yo-yo with Europe pulling the string. Markets are up today but not really that much compared to the hit they have taken over the past few days. And there is "Fed risk" today, as the Federal Reserve is about to make its pronouncement on the economy this afternoon.
2. I do not yet trust the gold rally over the short term (longer term positions are a separate matter - a hold). The US dollar pulled back today, which explains the move up this morning, but the US dollar rally is not broken yet. Until the dollar breaks further, look for gold to languish. I admit that closing back above the 50 day moving average will look good to technical analysts and hedge funds. "Fed speak" can send gold either way potentially as Chairman B. hints at the ways in which he can save the financial planet. He really needs to have a super hero costume.
If John Paulsen is buying gold and gold stocks, does that mean you should? Per CNBC he has lost quite a bit of his investors' money this year (over half). Remember, when any great investor gets "too big," their cooking is almost always spoiled eventually by their sheer size. Buffett has gotten around it by buying entire companies. Hedge funds are not in the business of conducting real businesses, so they don't have this available to them.
3. I've noticed a market timing outperformance of emerging markets that may be a theme going forward (VWO; EEM). VWO hit its uptrend line yesterday and is moving up again. Compare that ETF to the small cap growth stocks that have broken that uptrend line (IWO).
Market Timing Brief for 10-23-2011: European Fix
The scene is peaceful. Fall leaves blow in the breeze. Lovers kiss in the moonlight. The place in Europe. Wake up now. That was just a dream. There is still a major financial crisis going on and we have market timing analysis to do here. CNNMoney reports this evening: "France and Germany will work hard to ensure that progress will be made," Merkel said. "There is no precedent. No expert can tell us with 100% confidence what to do."
Have you seen this statistic from CNNMoney: “At its peak borrowing near the end of 2008, Dexia (EuroBank recently requiring immediate aid to prevent failure) received $58.5 billion from the Fed.” Fifty-eight billion in loans to a bank in Europe, unknown to most Americans. Did you know that Goldman Sachs has been calling in more and more collateral from Dexia to protect their loans to the bank? No wonder Goldman Sachs is down from around 192 to 102 on Friday, despite a recovery wave back up based on hope that the European Union will take care of Goldman Sachs and other financial institutions.
The Fed made the world whole through the bale out of AIG guarantees to banks who bought insurance against risky loans. Now our banks are going to expect the same absorption of pain by European governments with the accompanying marked weakening of their currency it must entail. They will come after the money of European savers just as the Fed has stolen billions from American savers in the form of a not so covert tax on savings. Remember that although European Central Bank interest rates are low, they still have not been lowered to zero as our Fed has done.
The Treasury market has not given a market timing signal of "all clear" yet. Treasuries barely moved up in yield on Friday, despite the SP500 Index breakout. This means there is a lack of confirmation in market timing terms.
The VIX was falling on Friday, but must rebreak the Aug. and Sept. lows for the market to maintain its Bull status for more than a day or two.
The positives include the breakouts in the Dow, the SP500 Index and the new recent high in the Dow Transports. The strength of the housing index is another positive. Low interest rates are a great help of course, but is the market expecting too much?
Negatives beyond those mentioned above include:
1. The banking index (BKX) has not broken out with the rest of the market. Still, it has recovered to near the top of the range it has been in since mid August.
2. The NDX (QQQ tech index) is below the intraday 9-20 high but above the 9-19 closing high. Net is negative.
3. The US dollar index has been in a holding pattern the past few days as if the currency markets have still not decided the fate, even over the short to intermediate term of the Euro.
4. The lack of participation of the small and midcap stocks in the breakout on Friday of the SP500 Index. They can catch up of course, but they must catch up or Friday will be seen as one day above resistance, a failed market timing breakout.
Market Timing Brief for 10-19-2011: The Yo-Yo Market
The chart of the VIX (volatility index indicating the degree of fear in the market as measured for the SP500 Index) looks very similar to the chart of the SP500 Index before it reversed from its low. There was a false BREAKDOWN in the SP500 and then a hard and fast reversal. When the VIX broke temporarily to new lows, the SPX (SP500 Index) was moving up strongly.
Now the VIX has done the same kind of reversal at a bottom. It recovered from a false breakdown and is now rallying again. That means that fear is rising again as the market sells off. The question now is whether the VIX will put in a lower high than it did in prior pullbacks, will it match the prior lower highs, match the highest recent high in early August OR will it skyrocket as the market crashes through the prior base to the summer 2010 lows.
No one can really tell you, because they do not know how incompetent the European leaders will be. The European Union was built to not function in times of crisis. So called experts also do not know how soft the economy will become either. Those are the two biggest unknowns.
The next positive news particularly from Europe could send this market to new recent highs and the next negative news could send the market back to the August low or lower. The market has become a news activated yo-yo.
The pullback today was not lethal, but follow the banking stocks (BKX). If the BKX index falls below 36.44 on a close, the SPX will follow. If the NDX (QQQ/Nasdaq 100 Index) does not rise back above the 9-20 high, the overall stock market will continue to decline as well. Tech led us up. Tech is today, post Apple earnings, pointing us down.
If you "like" what you've read, could you "Like" and/or retweet it below? Thanks very much. Check out my passive shorting page here if you have never read it:Profiting from Selling
MARKET TIMING BRIEF (7-12-2011): The President is "briefed" every day, so I figure investors and traders should be too. So in brief, my observations are:
Update at 2:30 pm ET: Don't buy the idea that the FED minutes said unequivolcally that the Fed will spew out more money immediately. Here is what they actually said in the JUNE FED MINUTES:
"On the one hand, a few members noted that, depending on how economic conditions evolve, the Committee might have to consider providing additional monetary policy stimulus, especially if economic growth remained too slow to meaningfully reduce the unemployment rate in the medium run. On the other
hand, a few members viewed the increase in inflation
risks as suggesting that economic conditions might well
evolve in a way that would warrant the Committee taking
steps to begin removing policy accommodation
sooner than currently anticipated."
1. The markets are going more or less sideways today as I thought they would yesterday. Usually markets don’t go straight down. They pause and then drop to the next level. There could be at least 2 more rounds of that before we reach a market timing bottom here in my opinion.
2. Gold has some tone in market timing terms, but has been deflected thus far from the 3 prior highs from April to June. It must get through there of course and then make a new high and the all time high is not that far from those 3 tops. So this is an awkward place to be buying gold unless you are hedging Euro-Risk and don’t own enough gold in general. It is not a great technical buying point! That said, gold decided to rally and break through the resistance as of 2:12 pm! At this point, I would buy a new high above the prior all time high.
As long as Europe is still a mess and it looks like it will be for a while, gold should hold up. Big interventions are a risk to those who are trading gold short term however. When the governments come in on their stallions, the markets usually calm down a bit and risk trades come off and that means gold moves down and stocks move up. Don’t be deceived by minor swings in the market as mentioned.
3. There is a bid in REITs this am and the May high is being tested from below. My guess would be that it won’t hold into the close, but we’ll see. I would not touch REITs until they make a new high.
4. The big market timing picture on the charts is very Bearish, because when you step back and look at any of the major indices from across the room, what do you see? You see a bunch of massive tops that we are now coming down from. Look at tech as represented by the QQQ (NDX). Massive top and now we’re coming down. This is the perfect place to lighten up, and we did so aggressively on Friday.
5. The US dollar index (UUP) is above the market timing pennant formation and retesting the 21.67 level. The US dollar index is making a run at the May high (see on Yahoo Finance here: US Dollar Index. In sum, the dollar rally is still in play, but is coming up against some resistance and hesitating.
1.The unemployment rate inched up to 9.2% with only 18,000 jobs added to the non-farm payrolls. This says the economy is softer than predicted. A part of this was a reduction of government jobs which reduced the overall gains from private job creation, which were 57,000 for June. So where the government was helping, it is now hurting the economy and the slack is not being taken up by the recovery. This means earnings forecasts will have to come down more, so lower E’s and higher PEs, lower stock prices.
My opinion? Time to set stops on your profits. Don’t just give them up. You can always rebuy higher. See my passive shorting™ page for further discussion: Profiting by Selling
2. There are some very significant market timing signals going off today - they are called "island reversals" which are very Bearish. They are formed on a daily chart when the market gaps up as it did yesterday and then gaps down as it did today. If that gap is left unfilled, which I would guess that it will, the negative island reversal is formed.
3. Gold is up 0.76% (GLD; IAU) and SLV is up 0.93%. Money has to go somewhere and it is clearly going to some extent from stocks to metals, not just to cash. Oil was down on the news, WTI sweet crude down $1.65.
4. The US dollar rallied along with gold and silver. All three, but especially gold and the dollar, are acting like "real money." Silver has that potential, but still jumps around like a commodity from time to time swooning 30-50%. Gold moves more gradually as "real money" does. On a market timing basis, the dollar still looks good. It has been back filling lately.
5. Bonds rallied strongly on the numbers with the 10 year bond trading just before the open at 3.04% down from around 3.18% before the announcement of the jobs report.
6. Do not trust all the data you get from Wall Street. Multiple data feeds I look at said the SP500 Index opened at 1352.39, down only 0.06%. Yes zero point OHHHH 6 percent! Futures were down nearly a percent, so what planet are they referring to? This stuff is important, because these sorts of data manipulations can erase technical signals and change market timing conclusions.
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Yesterday's post was on my blog (see Navigation Bar to left).
7-05-2011 MARKET TIMING BRIEF:
1.Today's threat is that Greek debt may be downgraded if it is rolled over in a way that gives investors less than they got in the original debt offering. Debt agencies are under the gun to be more honest than ever given the failure of many firms to perceive risk during the still continuing housing crisis.
2. If you believe in this recovery, buy oil at least after the government oil selling spree ends. Please note that the OIL ETF tracks oil very poorly over long time frames due to the time decay of the holdings. Compare a market timing chart of light sweet crude to OIL over short and long time frames. It is OK as a market timing vehicle over the short to intermediate term (up to months not years).
3. The easy money in shorting bonds is gone at this point. At least the 15 min YIELD chart has been broken for the 10 year and 30 year Treasuries. This does not mean rates won't back up more, but the easy first run up in yields is over.
4. GLD, the gold ETF, failed exactly where it should have, at 147.19. A move above there would be Bullish, but it also has to get past 147.42 and 148.10 resistance above there.
5. The US dollar index has support at 21.19. It has formed a pennant with the top line at 21.63 and further resistance above there @ 21.68, 21.76, and 21.86. The bottom line of the pennant falls at about 21.11 right now. The US dollar index may be rallying in part due to point #1 above.
1. Yesterday I commented that some foreign markets were not participating in this rally very enthusiastically. That is changing. China's FXI moved up today even closing above the May low which shows strength. The Pacific Rim Stock ETFs (e.g., VPL) also gained significant strength. Foreign markets were strongly than ours with the exception of the NDX (QQQ) which beat out the Pacific Rim.
2. Small caps and mid caps have been most resilient in this move up. They moved up today too but with small growth, small value, and midcaps moving least today.
3. Yesterday I said: "Bonds have been selling off for the past two days with 10 and 30 year Treasuries taking a big hit and potentially changing trend. This may be due to the imminent end of QE2, the Fed's quantitative easing program." That trend continued today with a big jump in the 10 year Treasury yield to 3.158% (it was below 3% and bottomed at 2.847% on 6-24-2011 before Greece got it's Euro-Infusion). This is an important market timing signal in my view. If this sell-off in Treasuries becomes too strong, stocks will start to hit a wall.
4. Gold has been weak in the face of a generally weakening commodities market, which continued today. But although the dollar was weak today (see #5 below), GLD fell 0.68% today. This is a Bearish sign. The May lows are the next support that will be tested. Below there, if GLD does not hold, look for 141 or so.
5.The UUP fell to 21.22 today, below BOTH support levels that I had previously mentioned (21.27 and 21.38). Next is trend line support at 21.13 and then the prior June low of 21.01. After that, we're back retesting the prior low, and the stock market will be rallying.
6. Chicago PMI was up strongly today and is known to be highly predictive of the National ISM number for manufacturing due out tomorrow. This could further boost the markets if it exceeds the negative expectations. Understand that if the economy is getting stronger, the market will tolerate somewhat higher interest rates. What the market fears is stagflation.
7. Yesterday I said: "If the SPX closes above 1300 today, there could be significant follow through. Realize that one day over may not be enough, so have a stop if the rally fails." The SP500 index continued its rally. It will keep going at least a few more days as money moves from safety (US dollar and gold) back to "risk." What's my first target for the SP500 Index?
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Important Brief from yesterday (6-29-2011): The dollar is not yet dead. If the dollar trend holds up will be hugely important. Up till recently, the weak U.S. dollar has supported the prices of everything causing gold and stock prices to explode upward. The dollar has been attempting to find some traction recently, so that may NOT be true over the short to intermediate term. Dollar strength dampens the earnings of our multinational companies, because their prices become less competitive as the dollar gets stronger. In addition, the economy has sputtered recently, which will drive the E of the PE ratios of stocks downward.
5-18-2011 Market Timing Update: 4:02 pm
The US dollar is still hanging on to recent gains, but consolidating. Here is where we stand: Be Aware of the Dollar
5-12-2011 Market Timing Update: 1:16 pm
The US dollar is attempting to hold onto recent strength, which is a problem for metals including gold as well as stocks. Here are the numbers: Following the Markets
The Fed is having its first ever press conference today in the interest of transparency, so the markets are on "pause" for a few hours. As if we cannot see through the charades? What we need is fiscal responsibility, not clean windows peering onto fiscal irresponsibility. It's like your child coming to you and saying "Dad, I'm burning the house down." "Thank you for your transparency Son." Yikes! What we have is a dirty house with clean windows.
That aside, what is happening in the market timing world?
The SP500 Index HAS broken out to an important new high on a market timing basis. Be sure to review the SP500Tracker page on the blue navigation bar to the left. Many other markets are breaking out as well, including Europe, and the US REITs. Gold continues to move onward and upward having broken out before the SP500 index.
All of this bullishness is brought to you lovingly by the collapsing US dollar. I did not think the Fed and the rest of the world would allow the US dollar to sink to the 2008 financial crisis low, but that is what Dr. Ben is doing. The fly in the ointment and the necessary caution comes when one realizes that the central bank can turn OFF the spigot as easily as they've turned it on. Which means the ENTIRE series of breakouts I just mentioned could collapse.
Which is why you would benefit from subscribing to my newsletter where I give you the actual entry and exit points I am using for a portfolio diversified across all the important indices.
The market "gapped up" this morning on the news of Intel earnings. It seems Intel is selling more chips than they expected! So where does this bring the SP500 Index in market timing terms? Essentially, we bounced up to the yellow line in my last SP500 tracking newsletter (access is free on Blue Bar to upper right). That could hold this mini-rally, but a close above 1323 and even better, above 1324.46 would be a sign of strength in the SP500 index and possible continuing rally. Remember there is resistance above at the "yellow line" and the two highs above the line on that same chart from last week's free issue. So the market could fail and turn down again at either of those levels.
Why mention the resistance? Although we buy when we get signals, we also sell on reversals, because why would you keep a position if the signal your buy was based upon was invalidated? In the same way, you would not in general buy company ABC based on earnings of X and then hold it even though earnings had fallen in half. So when the market timing signal is voided, the BUY becomes a SELL.
What about the US dollar index? Not doing too well! After appearing to start a rally on Monday, yesterday the US dollar gave it all back and today gave back even more. We are now down near the 2009 support level and if we break that, the next stop would be a 5% drop or so to the 2008 low. And gold will be moving up strongly if that happens.
Speaking of gold. Gold broke out again last week as reported to my subscribers and we bought more. The major breakout was back on 4-5-11 and last week was a second breakout. This market timing breakout is an important one because gold was stuck from November 2010 to the day of the breakout. In March there were a couple of retests of the breakout above the December 2010 high and GLD survived those tests. But we really needed this last breakout to be sure AND we got it. Gold is a still a go, yes, even at these levels. Remember to average in steps rather than buying all at once to avoid being "whipped" by the market.
That said, any reversal of gold from this level would not be taken lightly. It would likely result in a very hard sell-off of gold and even more so of silver.
If you have not signed up for the "Tips" newsletter, please click on the SECOND BUTTON FROM THE TOP of the Blue Navigation bar to the left. You'll be glad you stayed connected. Enjoy your day, Dave.
4-13-2011 Market Timing Update: 11:38 am: Watch the NASDAQ 100
The NDX will show you where this market is headed. The NDX is tracked by the famous QQQ ETF and represents big tech. Big tech is saying in market timing terms that the market is still in correction mode as long as we have a close in the NDX under 2323.5. Apple is the top dog in the NDX and it has led the index down since February. Yes, this correction has been under way for a while and now the bounce that occurred into the end of March appears to be over.
This does not mean the correction will be more than the typical 5-10% correction necessarily, although the reversals from breakouts above the 2007 highs for both tech and small cap stocks signal the possibility of a more serious correction. It could get as bad as April 2010. But let's not jump too far ahead. What we have now is a correction that is likely to take us at least back to the March low.
To get all my exit numbers and entry numbers after every market day, be sure to subscribe to my newsletter. Just click the subscribe button to the left on the Navigation Bar. And be sure to check back tomorrow for an update on the AAII survey of investor sentiment. Here is my last weekly report on Investor Sentiment and it is NOT positive: AAII Survey of Investor Sentiment
4-06-2011 Market Timing Update: 10:08 am: Gold Good. US Dollar Bad. For Today Anyway.
Gold (GLD, IAU) has finally broken out again on a market timing basis and it's time to add to our positions. That is what my subscribers did before the close yesterday, but there is still time. Add with each step up. Exactly how much upside you demand is up to you.
Supporting the breakout in GLD, the gold ETF, is a further weakening of the US dollar index along with a further strengthening of the Euro to this morning above 1.4300. The US dollar index trade is falling precariously below the 75.63 market timing signal level and on a close below there today, you can kiss the November 2010 low goodbye. Even now the US dollar appears to have broken the 75.63 level intraday. It may not make it back over and we will close out this trade at a loss. The US dollar trade lost us 2.26%.
I realize that we could be "whipped" here if the Fed matches the ECB with action to support the dollar as the ECB is supporting the Euro through a supposed interest rate hike to 1.25% tomorrow from 1.00%. Our Fed members are jawboning with threats to raise interest rates and decreasing QE2, which I believe will happen sooner than other market forecasters are telling you. This would drive stocks (metal stocks included), gold and other commodities down temporarily.
I'll write about what I expect after a near term correction in an upcoming blog post. Realize that this does not mean sell all your SP500 index ETFs and other stocks and metals. Mostly, they are breaking out, and I've learned to follow these breakouts while tightening stops up a bit. If you want to follow our exact entry and exit points, please subscribe to the newsletter (click on the Subscribe button to the left if you want to be kept up to date on a daily basis).
What is the next stop for the US dollar index IF the Fed and Treasury decide to let it drop further? (Yes, in the near term they can control the drop; a 0.25% increase in rates would cause the US dollar to rocket several percent.) The next stop would be the November 2009 low down at 74.23.
It could be that the world is willing to tolerate another slip of the US dollar index, but it is not helpful to European export growth. That is why I was expecting the US dollar to hold up at this level. It may not, but we won't know until the close. If the dollar reverses up through 75.63 and gold dives, you will need to have stops to protect your trading gold capital (you will need to sell). Remember that I believe that one should have a core position in gold/GLD and a trading position. Consider core gold positions like savings. Long term positions can be kept in the IAU which had lower expenses the last time I checked, but the GLD is more liquid and can be traded more easily in the pre and post markets.
Standard Disclaimer: Remember, it's your money and your decision as to how to invest it.
3-30-2011 Market Timing Update: 12:15 pm: Gold (GLD) Cannot Do It, the US Dollar Index May Do It and the SP500 Index IS Doing It.
The GLD cannot make it over the critical number 139.54 and stay there. That is not good news for gold in the near term. As usual, this comment does not apply to long term positions that you are treating the same way you treat your US dollar or otherwise denominated cash.
In my opinion, you should have a "gold as cash" position and add to it a trading position in gold if you like.
We were buyers in the paid newsletter at the 3-25-2011 close for the SP500 index. The index continues to frustrate the Bears by making more progress. I'll comment on sentiment tomorrow, but it has been weak lately, so it's of no help to the Bears (keep track of what is happening on my "Read My Feed" page and my "Market Timing Blog" page (see Blue Buttons to left). The AAII sentiment survey comments will appear on the page I have dedicated to it (see feed page for link tomorrow by noon). The SP500 index chart can be viewed on my SP500 Tracker™. Subscribe here to view it for FREE:
As for the US dollar index, it is still hanging onto it's tentative breakout by a thread, maybe by two threads. If you look at the chart of UUP, it has been trading sideways for several days, and there is no edge to entering here. From this point it could go either way. Moving down would probably result in a failure of the breakout above the 75.63 level for the US dollar index itself and be the time to exit the trade. The index has moved up enough to take off the "tension" of the recent drop. When indices are stretched to the downside, they are often candidates for bounces, but not once the stretch is relieved by either a bounce or a prolonged sideways move.