FREDAlert!

The markets are up strong in the night session, on news of a potentially successful drug therapy trial for Coronavirus in the Chicago area.

Monday’s close was not as we wished, but in some respects, it was better than we have seen in other down days, with a drift down from the high.

We have been asked about the market and feel we should put out an alert, but frankly fewer people than normal have sent panicky emails, probably because we have been writing about the possibility of this type of action for a while – so subscribers should not be surprised and likely are not.

Since we were unable to do our weekly conference call we will give this quick update on the state of the equity markets through yesterday’s close.

We do NOT have a daily stochastic buy signal yet but would continue to nibble. We believe, and indicators suggest, that there will be a pullback to this move where we would get a real, strong buy signal and conservative players should watch for this.

Often when % Bears on Investor’s Intelligence are low (and they are in the 13% range) you get this sort of flush. This is a bit more dramatic because of the amount of Dow points involved. We still think it likely that the SPY 260 area holds the first part of this decline. We would add some cash at that number.

Tax Loss Bounce Stocks

The result of the British vote to leave the European Union has stunned financial markets although this possibility had existed and is doubtless factored in by some investors. Use an exit vote to sell bonds and buy dividend-paying stocks.  We would hold or even add slowly to GLD for investors.

With Wednesday’s trading, SPY has violated the 189-area mentioned in the weekly as a stop loss. Especially for less aggressive advisors, this is the place to raise back the cash added back in at 194.00 on Thursday January 7th.

We have been expecting down into Friday and tomorrow could be down as well, but we are seeing some signs of panic that cannot be ignored if you are an aggressive player.

SPY is again flirting with the 202 area we have mentioned as a benchmark for the rally off of the 190-area low. 

Tax Loss Bounce Stocks

While the market has fallen roughly 14.67% this may not be the end – the reason as we have said before, is the weak internals prior to this decline.  We are in the neighborhood of a trading bounce, but at the same time this looks like a kick off move to the downside.

Thursday was an interesting day in the markets, kind of frustrating in a way as SPY moved right smack to our target area of 204 and closed slightly below it at 203.97.

Monday’s stock market action, and the prospect for some more downside into the end of the day on Tuesday is welcome and in line with some of our forecasts for a decline into the end of June/July.

Sector changes in Healthcare and Materials.

Tax Loss Bounce Stocks

We have a published stop at 113 so we would have to sell GLD here.  We have liked Japan for a while and continue to do so.  We are close to 203 targets for SPY and think SPY can trade as high as 209 this year, our original forecast.

Be patient as we have been looking for corrective behavior and advisors should have cash to take advantage of this. Add a bit in this area so that our 20% cash positions are reduced to 15% or so if this has not already been done.

Tax Loss Bounce Stocks